We estimate a joint multivariate jump-diffusion model using daily data for three fundamental stock market factors: market return, value, and momentum. We focus on the description of risk represented by the joint dynamics of factor volatilities and extreme events. With regard to extreme events,...

This paper compares model-based and reduced-form forecasts of financial volatility when high-frequency return data are available. We derived exact formulas for the forecast errors and analyzed the contribution of the "wrong" data modeling and errors in forecast inputs. The comparison is made for...