Bayesian emulation for multi-step optimization in decision problems

DOI10.1214/18-BA1105MaRDI QIDQ1757667zbMATH OpenOpenAlexWikidataFDO

Authors Kaoru Irie, Mike West

Publication date 15 January 2019

Published in Bayesian Analysis (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1607.01631, https://projecteuclid.org/euclid.ba/1524103230

zbMATH Keywords

sequential optimizationBayesian forecastingdynamic dependency network modelsmarginal and joint modesmulti-step decisionsportfolio decisionssynthetic model

Mathematics Subject Classification ID

Bayesian inference (62F15) Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Applications of statistics to actuarial sciences and financial mathematics (62P05) Bayesian problems; characterization of Bayes procedures (62C10)

Abstract: We discuss the Bayesian emulation approach to computational solution of multi-step portfolio studies in financial time series. "Bayesian emulation for decisions" involves mapping the technical structure of a decision analysis problem to that of Bayesian inference in a purely synthetic "emulating" statistical model. This provides access to standard posterior analytic, simulation and optimization methods that yield indirect solutions of the decision problem. We develop this in time series portfolio analysis using classes of economically and psychologically relevant multi-step ahead portfolio utility functions. Studies with multivariate currency, commodity and stock index time series illustrate the approach and show some of the practical utility and benefits of the Bayesian emulation methodology.

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Cited in

(8)

• Bayesian forecasting of multivariate time series: scalability, structure uncertainty and decisions
• Bayesian filtering for multi-period mean-variance portfolio selection
• Adaptive variable selection for sequential prediction in multivariate dynamic models
• Dynamic variable selection with spike-and-slab process priors
• Bayesian Optimization for Cascade-Type Multistage Processes
• Bayesian optimization of empirical model with state-dependent stochastic forcing
• Bayesian emulation for multi-step optimization in decision problems
• Augmented simulation methods for discrete stochastic optimization with recourse

Describes a project that uses

Uses Software

• rSGDLM
• bvarsv
• Ox

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