The prediction of volatility is of primary importance for business applications in risk management, asset allocation and pricing of derivative instruments. This paper proposes a novel measurement model which takes into consideration the possibly time-varying interaction of realized volatility...

We perform a large-scale empirical study to compare the forecasting performance of single-regime and Markov-switching GARCH (MSGARCH) models from a risk management perspective. We find that, for daily, weekly, and ten-day equity log-returns, MSGARCH models yield more accurate Value-at-Risk,...