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Questions tagged [forecasting]

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38 votes
6 answers
14k views

How to estimate real-world probabilities

In the world of finance, Risk-neutral pricing allow us to estimate the fair value of derivatives using the risk free rate as the expected return of the underlyings. However, the behavior of ...
sets's user avatar
  • 1,471
40 votes
5 answers
8k views

Why aren't econometric models used more in Quant Finance?

There is a big body of literature on econometric models like ARIMA, ARIMAX or VAR. Yet to the best of my knowledge practically nobody is making use of that in Quantitative Finance. Yes, there is a ...
vonjd's user avatar
  • 27.5k
28 votes
8 answers
16k views

How are cryptography and speech recognition technology applied to forecasting financial markets?

One of the answers to my previous question regarding the strategy of Renaissance Technologies, there was a reference to The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly ...
vonjd's user avatar
  • 27.5k
3 votes
1 answer
390 views

Is there a HAR that deals with the leverage effect?

The EGARCH is a special GARCH model that treats the leverage effect of the volatility. The HARV does not make a distinction between negative and positive returns. Is there a special HARV that deals ...
Hans's user avatar
  • 2,806
37 votes
4 answers
10k views

What types of neural networks are most appropriate for trading?

What types of neural networks are most appropriate for forecasting returns? Can neural networks be the basis for a high-frequency trading strategy? Types of neural networks include: Radial Basis ...
phoenix1886's user avatar
26 votes
3 answers
5k views

How to forecast volatility using high-frequency data?

There is a large literature covering volatility forecasts with high-frequency tick data. Much of this has surrounded the concept of "realized volatility", such as: "Realized Volatility and ...
Shane's user avatar
  • 9,245
20 votes
3 answers
3k views

What type of analysis is appropriate for assessing the performance time-series forecasts?

When using time-series analysis to forecast some type of value, what types of error analysis are worth considering when trying to determine which models are appropriate. One of the big issues that ...
kaybenleroll's user avatar
2 votes
1 answer
3k views

Is this the correct way to forecast stock price volatility using GARCH

I am attempting to make a forecast of a stock's volatility some time into the future (say 90 days). It seems that GARCH is a traditionally used model for this. I have implemented this below using ...
KOB's user avatar
  • 193
18 votes
2 answers
2k views

How to forecast expected volatility from high-frequency equity panel data?

I'm wading through the vast sea of literature on realized volatility estimation and expected volatility forecasting (see, e.g. Realized Volatility by Andersen and Benzoni, which cites 120 other papers,...
Tal Fishman's user avatar
  • 13.5k
11 votes
1 answer
1k views

Is volatility for the next day forecastable? To any extent?

In a more general way: is there 1) a methodological approach to quantify the correctness of a model that produces a probability distribution for the, say, S&P 500 index return for the next ...
mt_christo's user avatar
7 votes
2 answers
1k views

How do you synthesize a probability density function (pdf) from equally weighted price data?

What I'm working with: I have a collection of prices that has very few to no repeating values (depending on the look back period) ie each price value is unique, some prices are clustered and some can ...
montyhall's user avatar
3 votes
0 answers
583 views

Oscillatory time-series forecasting

I was wondering if this mean(160)-reverting/oscillatory time series "SUM" can be considered chaotic & forecastable to some extend short-term? http://sg.myfreepost.com/sgTOTO_analysispower.php?...
Shelagh's user avatar
  • 131
3 votes
2 answers
294 views

How to interpret and define statistics of GBM output

I am trying to model the future prices of a number of commodities. For this, I am applying geometric Brownian motion, writing a Monte Carlo code in Python. Given that I want to estimate tommorows ...
Andr's user avatar
  • 51
2 votes
1 answer
2k views

Forecast 3m LIBOR USD. Budget purpose

How can I calculate/budget/find a expectation for the 3 month LIBOR for the next 3monts-4 years? I am calculating a CF scenario on USD 3month Libor + margin. With swaps and fixed rate this is easy, ...
Petter S's user avatar
1 vote
1 answer
613 views

Constant decreasing volatility, GARCH forecasting

I am trying to forecast the volatility using GARCH modelling in R. I fit an ARMA(1,1)-GARCH(1,1) model, but my sigma predictions are constantly decreasing. Anybody know why? ...
user3384794's user avatar
1 vote
2 answers
875 views

How To Account For Inflation Over Historical Data

I believe inflation is greatly affecting my sample data, even when using percent-changes for movements. I have read this post, which recommends the formula ((Current-Base Year CPI) * Price) / (...
poorly_built_human's user avatar
0 votes
1 answer
2k views

Accuracy for GARCH models

How does one calculate the accuracy of forecasts given by GARCH models considering GARCH is run on returns. Assuming GARCH is a derivative of a regression based prediction model, would regular ...
Prgmr's user avatar
  • 11
0 votes
1 answer
178 views

Bond asset class long term assumptions [closed]

How are long term capital market expectations set in the industry? I'm looking to get some pointers about setting long term assumptions for fixed income asset classes like global high yield credit, ...
hauterob's user avatar
0 votes
4 answers
1k views

Filling a few missing data in time series?

I'm writing a paper about Uncertainty indices like VIX, etc. I already collected all data but it seems that some of the variables got a few or a little more missing data. I have daily and monthly data ...
user avatar
0 votes
0 answers
4k views

Rolling forecast using GARCH model

EDIT This is not a duplicate of my original question linked, since I have since overcome that problem and have posted an answer. Since solving the previous problem, I have run into the problem ...
KOB's user avatar
  • 193
0 votes
1 answer
910 views

Can I do a GARCH model to forecast a time series?

I read this paper https://research.aston.ac.uk/portal/files/240393/AURA_2_unmarked_Energy_demand_and_price_forecasting_using_wavelet_transform_and_adaptive_forecasting_models.pdf the two authors ...
Manuel's user avatar
  • 39
0 votes
2 answers
2k views

How to obtain one-step ahead forecast in Python based on GARCH?

I am trying to produce one-step ahead forecast using GARCH in Python using a fixed windows method. I ultimately want to put the code below in a for loop, but this code snippet does not perform as I ...
Xtiaan's user avatar
  • 103