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

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.

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.

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.

Operational river discharge forecasting in poorly gauged basins: the Kavango River Basin case study

Operational probabilistic forecasts of river discharge are essential for effective water resources management. Many studies have addressed this topic using different approaches ranging from purely statistical black-box approaches to physically based and distributed modeling schemes employing data assimilation techniques. However, few studies have attempted to develop operational probabilistic forecasting approaches for large and poorly gauged river basins. The objective of this study is to develop open-source software tools to support hydrologic forecasting and integrated water resources management in Africa. We present an operational probabilistic forecasting approach which uses public-domain climate forcing data and a hydrologic–hydrodynamic model which is entirely based on open-source software. Data assimilation techniques are used to inform the forecasts with the latest available observations. Forecasts are produced in real time for lead times of 0–7 days. The operational probabilistic forecasts are evaluated using a selection of performance statistics and indicators and the performance is compared to persistence and climatology benchmarks. The forecasting system delivers useful forecasts for the Kavango River, which are reliable and sharp. Results indicate that the value of the forecasts is greatest for intermediate lead times between 4 and 7 days

Maximum Entropy Approach for the Prediction of Urban Mobility Patterns

The science of cities is a relatively new and interdisciplinary topic. It borrows techniques from agent-based modeling, stochastic processes, and partial differential equations. However, how the cities rise and fall, how they evolve, and the mechanisms responsible for these phenomena are still open questions. Scientists have only recently started to develop forecasting tools, despite their importance in urban planning, transportation planning, and epidemic spreading modeling. Here, we build a fully interpretable statistical model that, incorporating only the minimum number of constraints, can predict different phenomena arising in the city. Using data on the movements of car-sharing vehicles in different Italian cities, we infer a model using the Maximum Entropy (MaxEnt) principle. With it, we describe the activity in different city zones and apply it to activity forecasting and anomaly detection (e.g., strikes, and bad weather conditions). We compare our method with different models explicitly made for forecasting: SARIMA models and Deep Learning Models. We find that MaxEnt models are highly predictive, outperforming SARIMAs and having similar results as a Neural Network. These results show how relevant statistical inference can be in building a robust and general model describing urban systems phenomena. This article identifies the significant observables for processes happening in the city, with the perspective of a deeper understanding of the fundamental forces driving its dynamics.Comment: 14 pages, 7 figure