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Digital Library of the
European Council for Modelling and Simulation |
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Title: |
Forecasting Financial Risks By Modified Grid-Based
Decomposition Algorithm For Normal Variance-Mean Mixtures |
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Authors: |
Alexander Korchagin, Viktor Korolev |
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Published in:
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(2015).ECMS 2015 Proceedings edited
by: Valeri M. Mladenov, Grisha Spasov, Petia Georgieva, Galidiya Petrova, European
Council for Modeling and Simulation. doi:10.7148/2015 ISBN:
978-0-9932440-0-1 29th
European Conference on Modelling and Simulation, Albena (Varna), Bulgaria,
May 26th – 29th,
2015 |
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Citation
format: |
Alexander Korchagin,
Viktor Korolev (2015). Forecasting Financial Risks
By Modified Grid-Based Decomposition Algorithm For Normal Variance-Mean
Mixtures, ECMS 2015 Proceedings edited by: Valeri
M. Mladenov, Petia Georgieva, Grisha Spasov, Galidiya Petrova European Council for Modeling
and Simulation. doi:10.7148/2015-0637 |
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DOI: |
http://dx.doi.org/10.7148/2015-0637 |
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Abstract: |
We describe an algorithm to forecast
financial risks using parametrized models of normal
variance-mean mixtures. The proposed method takes a set of
vectors as the input, containing a fixed number of the distribution
parameters – the final result of the modified two-step grid-based
decomposition algorithm applied to a moving time window. In this article we
use the class of generalized hyperbolic (GH) distributions as an example for
method demonstration. Practical applications of the method proposed and
processing speed are discussed in detail. We also describe the process of
calibrating the method as well as provide detailed instructions on how to
find the best fitting model. Using real market data we illustrate the
accuracy of the resulting forecasts depending on the method settings,
including long-term forecasts. |
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