scholarly journals Implementation of a Commitment Machine for an Adaptive and Robust Expected Shortfall Estimation

2021 ◽  
Vol 4 ◽  
Author(s):  
Marco Bagnato ◽  
Anna Bottasso ◽  
Pier Giuseppe Giribone
Keyword(s):  
Monte Carlo ◽  
Moving Average ◽  
Expected Shortfall ◽  
Learning Technologies ◽  
Estimation Methods ◽  
Vector Autoregressive ◽  
Strong Focus ◽  
Volatility Model ◽  
Asset Portfolio ◽  
Exponential Weighted Moving Average

This study proposes a metaheuristic for the selection of models among different Expected Shortfall (ES) estimation methods. The proposed approach, denominated “Commitment Machine” (CM), has a strong focus on assets cross-correlation and allows to measure adaptively the ES, dynamically evaluating which is the most performing method through the minimization of a loss function. The CM algorithm compares four different ES estimation techniques which all take into account the interaction effects among assets: a Bayesian Vector autoregressive model, Stochastic Differential Equation (SDE) numerical schemes with Exponential Weighted Moving Average (EWMA), a Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) volatility model and a hybrid method that integrates Dynamic Recurrent Neural Networks together with a Monte Carlo approach. The integration of traditional Monte Carlo approaches with Machine Learning technologies and the heterogeneity of dynamically selected methodologies lead to an improved estimation of the ES. The study describes the techniques adopted by the CM and the logic behind model selection; moreover, it provides a market application case of the proposed metaheuristic, by simulating an equally weighted multi-asset portfolio.

scholarly journals Identification and Estimation in Non-Fundamental Structural VARMA Models

2019 ◽  
Vol 87 (4) ◽  
pp. 1915-1953 ◽  
Author(s):  
Christian Gouriéroux ◽  
Alain Monfort ◽  
Jean-Paul Renne
Keyword(s):  
Dynamic Properties ◽  
Moving Average ◽  
Real Data ◽  
Identification Problem ◽  
Parametric Estimation ◽  
Estimation Methods ◽  
Linear Transformations ◽  
Structural Shocks ◽  
Vector Autoregressive ◽  
Matrix Polynomials

Abstract The basic assumption of a structural vector autoregressive moving average (SVARMA) model is that it is driven by a white noise whose components are uncorrelated or independent and can be interpreted as economic shocks, called “structural” shocks. When the errors are Gaussian, independence is equivalent to non-correlation and these models face two identification issues. The first identification problem is “static” and is due to the fact that there is an infinite number of linear transformations of a given random vector making its components uncorrelated. The second identification problem is “dynamic” and is a consequence of the fact that, even if a SVARMA admits a non-invertible moving average (MA) matrix polynomial, it may feature the same second-order dynamic properties as a VARMA process in which the MA matrix polynomials are invertible (the fundamental representation). The aim of this article is to explain that these difficulties are mainly due to the Gaussian assumption, and that both identification challenges are solved in a non-Gaussian framework if the structural shocks are assumed to be instantaneously and serially independent. We develop new parametric and semi-parametric estimation methods that accommodate non-fundamentalness in the MA dynamics. The functioning and performances of these methods are illustrated by applications conducted on both simulated and real data.

scholarly journals Estimating the Expected Shortfall in MYOR Stock Using the ARIMA-GARCH Model

2021 ◽  
Vol 2 (3) ◽  
pp. 118-123
Author(s):  
Jumadil Saputra ◽  
Alberto Simanjuntak
Keyword(s):  
Time Series ◽  
Time Series Analysis ◽  
Moving Average ◽  
Expected Shortfall ◽  
Autoregressive Integrated Moving Average ◽  
Average Value ◽  
Series Analysis ◽  
Stock Investment ◽  
Volatility Model ◽  
Autoregressive Conditional Heteroscedasticity

Stocks are one of the best-known forms of investment and are still used today. In stock investment, it is necessary to know the movement and risk of loss that may be obtained from the stock investment so that investors can consider the possibility of profit. One way of calculating risk is to use the Expected Shortfall (ES). Because the stock movement is in the form of a time series, a model can be formed to predict the movement of the stock which can then be used for ES calculations using time series analysis. The purpose of the study was to determine the expected shortfall value of MYOR shares using time series analysis. The data used for this research is the daily closing price of shares for three years. In the time series analysis stage, the models used in predicting stock movements are Autoregressive Integrated Moving Average (ARIMA) for the mean model and Generalized Autoregressive Conditional Heteroscedasticity (GARCH) for the volatility model. The average value and variance obtained from the model are then used in calculating the ES on MYOR stock. Based on the results of the study, it was obtained that MYOR's stock had an ES of 0.050772. This means if an investment is made for MYOR shares of IDR 1,000,000.00 for 37 days (5% of 751 days) for an investment period with a 95% confidence level, the expected loss to be borne by the investor is IDR 50,772.00.

scholarly journals CALCULATING VARIABLE ANNUITY LIABILITY “GREEKS” USING MONTE CARLO SIMULATION

2015 ◽  
Vol 45 (2) ◽  
pp. 239-266 ◽  
Author(s):  
Mark J. Cathcart ◽  
Hsiao Yen Lok ◽  
Alexander J. McNeil ◽  
Steven Morrison
Keyword(s):  
Monte Carlo ◽  
Interest Rate ◽  
Likelihood Ratio ◽  
Second Order ◽  
Stochastic Volatility Model ◽  
Estimation Methods ◽  
First Order ◽  
Hedging Strategies ◽  
Volatility Model ◽  
Index Value

AbstractThe implementation of hedging strategies for variable annuity products requires the calculation of market risk sensitivities (or “Greeks”). The complex, path-dependent nature of these products means that these sensitivities are typically estimated by Monte Carlo methods. Standard market practice is to use a “bump and revalue” method in which sensitivities are approximated by finite differences. As well as requiring multiple valuations of the product, this approach is often unreliable for higher-order Greeks, such as gamma, and alternative pathwise (PW) and likelihood-ratio estimators should be preferred. This paper considers a stylized guaranteed minimum withdrawal benefit product in which the reference equity index follows a Heston stochastic volatility model in a stochastic interest rate environment. The complete set of first-order sensitivities with respect to index value, volatility and interest rate and the most important second-order sensitivities are calculated using PW, likelihood-ratio and mixed methods. It is observed that the PW method delivers the best estimates of first-order sensitivities while mixed estimation methods deliver considerably more accurate estimates of second-order sensitivities; moreover there are significant computational gains involved in using PW and mixed estimators rather than simple BnR estimators when many Greeks have to be calculated.

scholarly journals Detecting long-memory: Monte Carlo simulations and application to daily streamflow processes

2007 ◽  
Vol 11 (2) ◽  
pp. 851-862 ◽  
Author(s):  
W. Wang ◽  
P. H. A. J. M. Van Gelder ◽  
J. K. Vrijling ◽  
X. Chen
Keyword(s):  
Monte Carlo ◽  
Monte Carlo Simulations ◽  
Long Memory ◽  
Moving Average ◽  
Likelihood Estimation ◽  
Large Data ◽  
The Other ◽  
Estimation Methods ◽  
Data Set ◽  
Daily Streamflow

Abstract. The Lo's modified rescaled adjusted range test (R/S test) (Lo, 1991), GPH test (Geweke and Porter-Hudak, 1983) and two approximate maximum likelihood estimation methods, i.e., Whittle's estimator (W-MLE) and another one implemented in S-Plus (S-MLE) based on the algorithm of Haslett and Raftery (1989) are evaluated through intensive Monte Carlo simulations for detecting the existence of long-memory. It is shown that it is difficult to find an appropriate lag q for Lo's test for different short-memory autoregressive (AR) and fractionally integrated autoregressive and moving average (ARFIMA) processes, which makes the use of Lo's test very tricky. In general, the GPH test outperforms the Lo's test, but for cases where a strong short-range dependence exists (e.g., AR(1) processes with φ=0.95 or even 0.99), the GPH test gets useless, even for time series of large data size. On the other hand, the estimates of d given by S-MLE and W-MLE seem to give a good indication of whether or not the long-memory is present. The simulation results show that data size has a significant impact on the power of all the four methods because the availability of larger samples allows one to inspect the asymptotical properties better. Generally, the power of Lo's test and GPH test increases with increasing data size, and the estimates of d with GPH method, S-MLE method and W-MLE method converge with increasing data size. If no large enough data set is available, we should be aware of the possible bias of the estimates. The four methods are applied to daily average discharge series recorded at 31 gauging stations with different drainage areas in eight river basins in Europe, Canada and USA to detect the existence of long-memory. The results show that the presence of long-memory in 29 daily series is confirmed by at least three methods, whereas the other two series are indicated to be long-memory processes with two methods. The intensity of long-memory in daily streamflow processes has only a very weak positive relationship with the scale of watershed.

Using The Fully Modified M Method In Estimating The Effect Of Cultivated Area On Barley Production In Iraq For The Period 1970-2018

2020 ◽  
Vol 2020 (66) ◽  
pp. 101-110
Author(s):  
. Azhar Kadhim Jbarah ◽  
Prof Dr. Ahmed Shaker Mohammed
Keyword(s):  
Regression Model ◽  
Moving Average ◽  
Estimation Method ◽  
Estimation Methods ◽  
Autoregressive Moving Average ◽  
Moving Average Models ◽  
Error Terms ◽  
Relationship Of ◽  
The Relationship ◽  
Barley Crop

The research is concerned with estimating the effect of the cultivated area of barley crop on the production of that crop by estimating the regression model representing the relationship of these two variables. The results of the tests indicated that the time series of the response variable values is stationary and the series of values of the explanatory variable were nonstationary and that they were integrated of order one ( I(1) ), these tests also indicate that the random error terms are auto correlated and can be modeled according to the mixed autoregressive-moving average models ARMA(p,q), for these results we cannot use the classical estimation method to estimate our regression model, therefore, a fully modified M method was adopted, which is a robust estimation methods, The estimated results indicate a positive significant relation between the production of barley crop and cultivated area.

Multivariate Markov-switching score-driven models: an application to the global crude oil market

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Szabolcs Blazsek ◽  
Alvaro Escribano ◽  
Adrian Licht
Keyword(s):  
Crude Oil ◽  
Moving Average ◽  
Local Level ◽  
Markov Switching ◽  
Impulse Response Functions ◽  
Common Trends ◽  
Vector Autoregressive ◽  
Oil Market ◽  
Long Run ◽  
Special Cases

Abstract A new class of multivariate nonlinear quasi-vector autoregressive (QVAR) models is introduced. It is a Markov switching score-driven model with stochastic seasonality for the multivariate t-distribution (MS-Seasonal-t-QVAR). As an extension, we allow for the possibility of having common-trends and nonlinear co-integration. Score-driven nonlinear updates of local level and seasonality are used, which are robust to outliers within each regime. We show that VAR integrated moving average (VARIMA) type filters are special cases of QVAR filters. Using exclusion, sign, and elasticity identification restrictions in MS-Seasonal-t-QVAR with common-trends, we provide short-run and long-run impulse response functions for the global crude oil market.

Hybrid approach combining EMD, ARIMA and monte carlo for multi-step ahead medical tourism forecasting

2021 ◽  
pp. 1-17
Author(s):  
Nuzhat Fatema ◽  
H Malik ◽  
Mutia Sobihah Binti Abd Halim
Keyword(s):  
Monte Carlo ◽  
Hybrid Model ◽  
Medical Tourism ◽  
Moving Average ◽  
Hybrid Approach ◽  
Mode Decomposition ◽  
Hybrid Forecasting ◽  
Input Variables ◽  
Intelligent Approach

This paper proposed a hybrid intelligent approach based on empirical mode decomposition (EMD), autoregressive integrated moving average (ARIMA) and Monte Carlo simulation (MCS) methods for multi-step ahead medical tourism (MT) forecasting using explanatory input variables based on two decade real-time recorded database. In the proposed hybrid model, these variables are 1st extracted then medical tourism is forecasted to perform the long term as well as the short term goal and planning in the nation. The multi-step ahead medical tourism is forecasted recursively, by utilizing the 1st forecasted value as the input variable to generate the next forecasting value and this procedure is continued till third step ahead forecasted value. The proposed approach firstly tested and validated by using international tourism arrival (ITA) dataset then proposed approach is implemented for forecasting of medical tourism arrival in nation. In order to validate the performance and accuracy of the proposed hybrid model, a comparative analysis is performed by using Monte Carlo method and the results are compared. Obtained results shows that the proposed hybrid forecasting approach for medical tourism has outperformance characteristics.

Improved exponential weighted moving average based measurement noise estimation for strapdown inertial navigation system/doppler velocity log integrated system

2020 ◽  
pp. 1-21
Author(s):  
Lanhua Hou ◽  
Xiaosu Xu ◽  
Yiqing Yao ◽  
Di Wang ◽  
Jinwu Tong
Keyword(s):  
Kalman Filter ◽  
Inertial Navigation System ◽  
Moving Average ◽  
Integrated System ◽  
Measurement Noise ◽  
Noise Estimation ◽  
Doppler Velocity ◽  
Forgetting Factor ◽  
Exponential Weighted Moving Average ◽  
Weighted Moving Average

Abstract The strapdown inertial navigation system (SINS) with integrated Doppler velocity log (DVL) is widely utilised in underwater navigation. In the complex underwater environment, however, the DVL information may be corrupted, and as a result the accuracy of the Kalman filter in the SINS/DVL integrated system degrades. To solve this, an adaptive Kalman filter (AKF) with measurement noise estimator to provide noise statistical characteristics is generally applied. However, existing methods like moving windows (MW) and exponential weighted moving average (EWMA) cannot adapt to a dynamic environment, which results in unsatisfactory noise estimation performance. Moreover, the forgetting factor has to be determined empirically. Therefore, this paper proposes an improved EWMA (IEWMA) method with adaptive forgetting factor for measurement noise estimation. First, the model for a SINS/DVL integrated system is established, then the MW and EWMA based measurement noise estimators are illustrated. Subsequently, the proposed IEWMA method which is adaptive to the various environments without experience is introduced. Finally, simulation and vehicle tests are conducted to evaluate the effectiveness of the proposed method. Results show that the proposed method outperforms the MW and EWMA methods in terms of measurement noise estimation and navigation accuracy.

Sign in / Sign up

Export Citation Format

Share Document