TY  - JOUR
AU  - Christoffersen,Peter F.
AU  - Diebold,Francis X.
TI  - Optimal Prediction Under Asymmetric Loss
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 167
PY  - 1994
Y2  - October 1994
UR  - http://www.nber.org/papers/t0167
L1  - http://www.nber.org/papers/t0167.pdf
N1  - Author contact info:
Peter Christoffersen
Professor of Finance
Rotman School of Management
University of Toronto
105 St. George Street 447
Toronto, ON, M5S 3E6, Canada
Tel: 416-946-5511
E-Mail: Peter.Christoffersen@rotman.utoronto.ca

Francis X. Diebold
Department of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA  19104-6297
Tel: 215/898-1507
Fax: 212/573-4217
E-Mail: fdiebold@sas.upenn.edu
AB  - 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.
ER  -