A fan chart turns a predictive density into central probability bands over the forecast horizon. Wider bands show more uncertainty. Asymmetric bands can show upside or downside risk.
Construction
The lab builds fan charts from density-combination output. For each horizon, it computes quantiles for central coverage levels such as 50, 70, 80, and 90 percent. The chart can show mean, median, mode, baseline, and historical overlay depending on configuration.
Risk Balance
Risk balance is read from the relation between mean, median, and mode, plus any configured skew tilt. This is a display and communication layer built on the density. It should not be read as an independent model.
Judgment Adjustments
The fan-chart step can apply:
- location shift
- variance multiplier
- skew tilt
The adjustment and rationale are recorded in the audit trail. Judgment changes should be labeled when a chart is shared.
Calibration
When actuals are available, the lab compares empirical coverage with nominal coverage. Small evaluation windows can make coverage noisy.
References
- Britton, Fisher, and Whitley, 1998, Bank of England fan charts.
- Gneiting and Raftery, 2007.