Horizon Problems and Extreme Events in Financial Risk Management

In this paper, we address this question, exploringthe interface between long-horizon financial riskmanagement and long-horizon volatility forecastabilityand, in particular, whether long-horizon volatility isforecastable enough such that volatility models are usefulfor long-horizon risk management. In particular, wereport on recent relevant work by Diebold, Hickman,Inoue, and Schuermann (1998); Christoffersen and Diebold(1997); and Diebold, Schuermann, and Stroughair(forthcoming).[...]