6,450 research outputs found
Bayesian nonparametric multivariate convex regression
In many applications, such as economics, operations research and
reinforcement learning, one often needs to estimate a multivariate regression
function f subject to a convexity constraint. For example, in sequential
decision processes the value of a state under optimal subsequent decisions may
be known to be convex or concave. We propose a new Bayesian nonparametric
multivariate approach based on characterizing the unknown regression function
as the max of a random collection of unknown hyperplanes. This specification
induces a prior with large support in a Kullback-Leibler sense on the space of
convex functions, while also leading to strong posterior consistency. Although
we assume that f is defined over R^p, we show that this model has a convergence
rate of log(n)^{-1} n^{-1/(d+2)} under the empirical L2 norm when f actually
maps a d dimensional linear subspace to R. We design an efficient reversible
jump MCMC algorithm for posterior computation and demonstrate the methods
through application to value function approximation
Common price and volatility jumps in noisy high-frequency data
We introduce a statistical test for simultaneous jumps in the price of a
financial asset and its volatility process. The proposed test is based on
high-frequency data and is robust to market microstructure frictions. For the
test, local estimators of volatility jumps at price jump arrival times are
designed using a nonparametric spectral estimator of the spot volatility
process. A simulation study and an empirical example with NASDAQ order book
data demonstrate the practicability of the proposed methods and highlight the
important role played by price volatility co-jumps
Nonparametric maximum likelihood approach to multiple change-point problems
In multiple change-point problems, different data segments often follow
different distributions, for which the changes may occur in the mean, scale or
the entire distribution from one segment to another. Without the need to know
the number of change-points in advance, we propose a nonparametric maximum
likelihood approach to detecting multiple change-points. Our method does not
impose any parametric assumption on the underlying distributions of the data
sequence, which is thus suitable for detection of any changes in the
distributions. The number of change-points is determined by the Bayesian
information criterion and the locations of the change-points can be estimated
via the dynamic programming algorithm and the use of the intrinsic order
structure of the likelihood function. Under some mild conditions, we show that
the new method provides consistent estimation with an optimal rate. We also
suggest a prescreening procedure to exclude most of the irrelevant points prior
to the implementation of the nonparametric likelihood method. Simulation
studies show that the proposed method has satisfactory performance of
identifying multiple change-points in terms of estimation accuracy and
computation time.Comment: Published in at http://dx.doi.org/10.1214/14-AOS1210 the Annals of
Statistics (http://www.imstat.org/aos/) by the Institute of Mathematical
Statistics (http://www.imstat.org
Parametric and Nonparametric Volatility Measurement
Volatility has been one of the most active areas of research in empirical finance and time series econometrics during the past decade. This chapter provides a unified continuous-time, frictionless, no-arbitrage framework for systematically categorizing the various volatility concepts, measurement procedures, and modeling procedures. We define three different volatility concepts: (i) the notional volatility corresponding to the ex-post sample-path return variability over a fixed time interval, (ii) the ex-ante expected volatility over a fixed time interval, and (iii) the instantaneous volatility corresponding to the strength of the volatility process at a point in time. The parametric procedures rely on explicit functional form assumptions regarding the expected and/or instantaneous volatility. In the discrete-time ARCH class of models, the expectations are formulated in terms of directly observable variables, while the discrete- and continuous-time stochastic volatility models involve latent state variable(s). The nonparametric procedures are generally free from such functional form assumptions and hence afford estimates of notional volatility that are flexible yet consistent (as the sampling frequency of the underlying returns increases). The nonparametric procedures include ARCH filters and smoothers designed to measure the volatility over infinitesimally short horizons, as well as the recently-popularized realized volatility measures for (non-trivial) fixed-length time intervals.
Parametric and Nonparametric Volatility Measurement
Volatility has been one of the most active areas of research in empirical finance and time series econometrics during the past decade. This chapter provides a unified continuous-time, frictionless, no-arbitrage framework for systematically categorizing the various volatility concepts, measurement procedures, and modeling procedures. We define three different volatility concepts: (i) the notional volatility corresponding to the ex-post sample-path return variability over a fixed time interval, (ii) the ex-ante expected volatility over a fixed time interval, and (iii) the instantaneous volatility corresponding to the strength of the volatility process at a point in time. The parametric procedures rely on explicit functional form assumptions regarding the expected and/or instantaneous volatility. In the discrete-time ARCH class of models, the expectations are formulated in terms of directly observable variables, while the discrete- and continuous-time stochastic volatility models involve latent state variable(s). The nonparametric procedures are generally free from such functional form assumptions and hence afford estimates of notional volatility that are flexible yet consistent (as the sampling frequency of the underlying returns increases). The nonparametric procedures include ARCH filters and smoothers designed to measure the volatility over infinitesimally short horizons, as well as the recently-popularized realized volatility measures for (non-trivial) fixed-length time intervals.
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