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Forecast Calibration

Trading Term

Calibration describes how closely stated probabilities correspond to observed frequencies over many forecasts. A well-calibrated forecaster who assigns 30% to a set of events will see close to 30% of them occur. Calibration is distinct from sharpness, since a forecaster who always issues the long-run base rate can be perfectly calibrated while conveying no information about any particular day, which is why calibration is usually assessed alongside a measure that rewards confident and correct departures from the base rate.

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