It depends. If volatility fluctuates in a forecastable way, then volatility forecasts are useful for risk management; hence the interest in volatility forecastability in the risk management literature. Volatility forecastability, however, varies with horizon, and different horizons are relevant...

The prescriptions of modern financial risk management hinge critically on the associated characterization of the distribution of future returns (cf., Diebold, Gunther and Tay, 1998, and Diebold, Hahn and Tay, 1999). Because volatility persistence renders high-frequency returns temporally...

We show that the common practice of converting 1-day volatility estimates to h-day estimates by scaling by the sqaure root of h is inappropriate and produces overestimates of the variability of long-horizon volatility. We conclude that volatility models are best tailored to tasks: if interest...

We propose using the price range, a recently-neglected volatility proxy with a long history in finance, in the estimation of stochastic volatility models. We show both theoretically and empirically that the log range is approximately Gaussian, in sharp contrast to popular volatility proxies,...

We provide a framework for evaluating and improving multivariate density forecasts. Among other things, the multivariate framework lets us evaluate the adequacy of density forecasts involving cross-variable interactions, such as time-varying conditional correlations. We also provide conditions...

Central to the ongoing development of practical financial risk management methods is recognition of the fact that asset return volatility is often forecastable. Although there is no single horizon relevant for financial risk management, most would agree that in many situations the relevant...

The virtual collapse of several Asian markets has triggered a series of aftershocks in the global financial markets. From the alleged contagion that spread the crisis to Russia and South America to the de facto collapse of Long-Term Capital Management (LTCM), the repercussions of these events...

Recent literature has trumpeted the claim that extreme value theory (EVT) holds promise for accurate estimation of extreme quantiles and tail probabilities of financial asset returns, and hence holds promise for advances in the management of extreme financial risks. Our view, based on a...