Conditional density and value-at-risk prediction of Asian currency exchange rates

We first demonstrate the simultaneous need for both more general GARCH stru ctures and non-normal innovation distributions for modelling the returns on certain return series such as the highly volatile exchange rates on East A sian currencies against the US dollar. This is accomplished not only via in -sample goodness-of-fit criteria, but also in terms of the precision of Val ue-at-Risk calculations made on out-of-sample density predictions. Second, a forecasting strategy using weighted maximum likelihood estimation is prop osed. We show that it gives rise to considerably improved forecast performa nce over longer horizons. Copyright (C) 2000 John Wiley & Sons, Ltd.