This chapter discusses estimation, specification testing, and model selection of predictive density models. In particular, predictive density estimation is briefly discussed, and a variety of different specification and model evaluation tests due to various authors including Christoffersen and...

Many financial decisions such as portfolio allocation, risk management, option pricing and hedge strategies are based on the forecast of the conditional variances, covariances and correlations of financial returns. Although the decisions are based on forecasts covariance matrix little is known...

We study the asymptotic refinements of a fully nonparametric bootstrap approach for quasi-likelihood ratio type tests of nonlinear restrictions. This bootstrap method applies to extremum estimators, such as quasi-maximum likelihood and generalized method of moments estimators. Unlike existing...

In risk management areas such as reinsurance, the need often arises to construct a confidence interval for a quantile in the tail of the distribution; for example, there is high probability that the sample maximum lies near or below the quantile. While different methods, including subsample...

In this paper we present a new asymptotically normal test for out-of-sample evaluation in nested models. Our approach is a simple modification of a traditional encompassing test that is commonly known as Clark and West test (CW). The key point of our strategy is to introduce an independent...