Next: Univariate context:
Up: Model specification
Previous: Historical Simulation
Since the horizon is already fixed by the data (and the holding period)
at 1 day, the
only remaining parameter one can associate with this method is the size of
the memory. Once again - because of the commonly used 250 day memory
(consistent with the BIS recommendation) we do not undertake any optimization
and use the model with this
pre-defined value. As in the case of the historical simulation model -
the 1000 univariate and multivariate
prediction realization pairs are constructed using the last 1251
data points in the 10 log differenced price change series k.