Evarist Stoja on Evaluating Multidimensional Value at Risk

Speaker:  Evarist Stoja - University of Bristol
  Tuesday, April 19, 2011 at 12:30 PM Biblioteca DSE, Palazzina 32 ex caserma Passalacqua

We propose two simple evaluation methods for time-varying density forecasts of continuous higher-dimensional random variables. Both methods are based on the probability integral transformation for unidimensional forecasts. The first method tests multinormal densities and relies on the rotation of the coordinate system. The advantage of the second method is not only its applicability to arbitrary continuous distributions but also the evaluation of the forecast accuracy in specific regions of its domain as defined by the user’s interest. We show that the latter property is particularly useful for evaluating a multidimensional generalization of the Value at Risk. In simulations and in an empirical study, we examine the performance of both tests.

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Programme Director
Angelo Zago

Publication date
February 28, 2011

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