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arXiv · 2604.10402

Risk-Sensitive Specialist Routing for Volatility Forecasting

Tenghan Zhong
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Abstract

Volatility forecasting becomes challenging when market conditions shift and model performance varies across market states. Motivated by this instability, we develop a risk-sensitive specialist routing framework for ETF volatility forecasting. The framework uses online risk-sensitive evaluation and state-dependent gating to combine different forecasting specialists across calm and stressed market states. Using a daily panel of six ETFs under a rolling walk-forward design, we find that the strongest forecaster is regime-dependent rather than stable across all states. Relative to the rolling-best baseline, the proposed routing framework reduces high-volatility forecast loss by about 24% and underprediction loss by about 22%. These results suggest that specialist routing provides a practical forecasting architecture that adapts to changing market conditions.

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BibTeXRIS

Tenghan Zhong. 2026-04-12. Risk-Sensitive Specialist Routing for Volatility Forecasting. https://arxiv.org/abs/2604.10402

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