## Introduction

When hopping from univariate volatility forecasts to multivariate volatility forecast, we need to understand that now we have to forecast not only the univariate volatility element, which we already know how to do, but also the covariance elements, which we do not know how to do, yet. Say you have two series, then this covariance element is the off-diagonal of the 2 by 2 variance-covariance matrix. The precise term we should use is “variance-covariance matrix”, since the matrix consists of the variance elements on the diagonal and the covariance elements on the off-diagonal. But since it is very tiring to read\write “variance-covariance matrix”, it is commonly referred to as the covariance matrix, or sometimes less formally as var-covar matrix.