The Financial Econometrics Seminar: 
Time: 10:30 pm
Date: 31th of March 2022
Room 3001+ zoom

Alessandra LUATI (University of Bologna) “GARCH density and functional forecasts”

Abstract :This paper derives the analytic form of the multi-step ahead \pof\ density of a GARCH(1,1) process under Gaussian innovations, with a possibly asymmetric news impact curve. The analytic form shows that the prediction density, while symmetric, can be far from Gaussian, which is sometimes used in applications as an approximation of it. The analytic form of the prediction density can be used to compute exact prediction tail probabilities and functionals, such as the Value at Risk and the Expected Shortfall. Finally the paper shows how estimation uncertainty can be mapped onto uncertainty regions for any functional of the prediction distribution.

Joint work : Karim Abadir, (Imperial College), and Paolo Paruolo, (JRC European Commission)

Organizers:

Jean-Michel ZAKOIAN  (CREST)

Sponsors:
CREST