7,428 research outputs found
Volatility forecasting
Volatility has been one of the most active and successful areas of research in time series econometrics and economic forecasting in recent decades. This chapter provides a selective survey of the most important theoretical developments and empirical insights to emerge from this burgeoning literature, with a distinct focus on forecasting applications. Volatility is inherently latent, and Section 1 begins with a brief intuitive account of various key volatility concepts. Section 2 then discusses a series of different economic situations in which volatility plays a crucial role, ranging from the use of volatility forecasts in portfolio allocation to density forecasting in risk management. Sections 3, 4 and 5 present a variety of alternative procedures for univariate volatility modeling and forecasting based on the GARCH, stochastic volatility and realized volatility paradigms, respectively. Section 6 extends the discussion to the multivariate problem of forecasting conditional covariances and correlations, and Section 7 discusses volatility forecast evaluation methods in both univariate and multivariate cases. Section 8 concludes briefly. JEL Klassifikation: C10, C53, G1
An early warning indicator for atmospheric blocking events using transfer operators
The existence of persistent midlatitude atmospheric flow regimes with
time-scales larger than 5-10 days and indications of preferred transitions
between them motivates to develop early warning indicators for such regime
transitions. In this paper, we use a hemispheric barotropic model together with
estimates of transfer operators on a reduced phase space to develop an early
warning indicator of the zonal to blocked flow transition in this model. It is
shown that, the spectrum of the transfer operators can be used to study the
slow dynamics of the flow as well as the non-Markovian character of the
reduction. The slowest motions are thereby found to have time scales of three
to six weeks and to be associated with meta-stable regimes (and their
transitions) which can be detected as almost-invariant sets of the transfer
operator. From the energy budget of the model, we are able to explain the
meta-stability of the regimes and the existence of preferred transition paths.
Even though the model is highly simplified, the skill of the early warning
indicator is promising, suggesting that the transfer operator approach can be
used in parallel to an operational deterministic model for stochastic
prediction or to assess forecast uncertainty
- …