Table 1.5 Financial risk forecasting errata

Table 1.5

October 22, 2011

My FM320 student Han Wang pointed out that Table 1.5 is not right. It is supposed to have a two tailed probability of outcomes, but the %1 number is 1-the one tailed prob, and the rest are one tailed. So, here are the correct numbers. Set the volatility to 1.16 as per Table 1.2, and get

1% 0.3886496
2% 0.08468295
3% 0.009703866
5% 1.630002e-05
15% 3.007448e-38
23% 1.721029e-87
with the R code to do the calculation

Figure 8.1 backtesting
Multiperiod volatility

Financial Risk Forecasting
Market risk forecasting with R, Julia, Python and Matlab. Code, lecture slides, implementation notes, seminar assignments and questions.
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