"Volatility Forecasting and asset allocation in portfolio management"

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My proposal area of study is Volatility Forecasting considering all the alternativedefinitions of volatility. Each supports a different objective and all are equallysignificant. Volatility is the conditional standard deviation of the asset returns andsuggests the random factor of the time series.Risk is fundamental on financial decision making process. Thus volatility forecastingarea has attracted many researchers. Many famous financial models requirecalculating the volatility. Illustrations are the Value-at Risk and Expected Shortfallmodels, asset allocation in portfolio management using the Markowitz method andasset and derivative pricing (Black-Scholes formula). However, volatility's utilizationspreads to other areas of social sciences as well.The main characteristic of volatility (and covariance) is that is unobservable even expost.Thus, producing accurate out-of-sample forecasts is vital.The first part of the study will focus on model estimation and volatility forecasting.The models are mainly classified into univariate and multivariate ones. Followingforecasting volatility, evaluation of those forecasts will be performed to test whetherthe forecasts are adequate enough. The second part will focus on asset allocationissues within a portfolio.