Obtaining loss functions of forecated volatility vs actuals

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Azim187
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Joined: Tue Jul 26, 2022 9:47 am

Obtaining loss functions of forecated volatility vs actuals

Postby Azim187 » Mon Aug 08, 2022 5:57 am

Hi there,

So I am comparing volatility forecasts produced by a range of models, and want to evaluate them against a proxy for actuals (which I'm using 5-min realized variance). In obtaining my forecasted values, I estimate an ARCH/GARCH model for my mean equation for an in-sample period, then forecast the out-of-sample period and save the resultant GARCH series. However, the loss functions such as MAE,RMSE,MAPE for this forecast are for the mean equation I believe. As I have my 'actuals' saved as another series, how do I generate a forecast purely for volatility and compare it to these actuals as to obtain the correct MAE,RMSE and MAPE?

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