NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Optimal Prediction Under Asymmetric Loss

Peter F. Christoffersen, Francis X. Diebold

NBER Technical Working Paper No. 167
Issued in October 1994
NBER Program(s):   EFG   CF

Prediction problems involving asymmetric loss functions arise routinely in many fields, yet the theory of optimal prediction under asymmetric loss is not well developed. We study the optimal prediction problem under general loss structures and characterize the optimal predictor. We compute the optimal predictor analytically in two leading cases. Analytic solutions for the optimal predictor are not available in more complicated cases, so we develop numerical procedures for computing it. We illustrate the results by forecasting the GARCH(1,1) process which, although white noise, is non-trivially forecastable under asymmetric loss.

download in pdf format
   (713 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/t0167

Published:

Users who downloaded this paper also downloaded* these:
Diebold and Lopez t0192 Forecast Evaluation and Combination
Christoffersen and Diebold t0217 Cointegration and Long-Horizon Forecasting
Diebold and Mariano t0169 Comparing Predictive Accuracy
Christoffersen and Diebold w6844 How Relevant is Volatility Forecasting for Financial Risk Management?
Andersen, Bollerslev, Christoffersen, and Diebold w11188 Volatility Forecasting
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us