Real-time financial surveillance via quickest change-point detection methods

DOI10.4310/SII.2017.V10.N1.A9MaRDI QIDQ1748623zbMATH OpenFDO

Authors Andrey Pepelyshev, Aleksey S. Polunchenko

Publication date 14 May 2018

Published in Statistics and Its Interface (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1509.01570

zbMATH Keywords

anomaliesCUSUM chartfinancial surveillancesequential analysisShiryaev-Roberts procedure

Mathematics Subject Classification ID

Sequential statistical analysis (62L10) Optimal stopping in statistics (62L15) Applications of statistics to actuarial sciences and financial mathematics (62P05)

Abstract: We consider the problem of efficient financial surveillance aimed at "on-the-go" detection of structural breaks (anomalies) in "live"-monitored financial time series. With the problem approached statistically, viz. as that of multi-cyclic sequential (quickest) change-point detection, we propose a semi-parametric multi-cyclic change-point detection procedure to promptly spot anomalies as they occur in the time series under surveillance. The proposed procedure is a derivative of the likelihood ratio-based Shiryaev-Roberts (SR) procedure; the latter is a quasi-Bayesian surveillance method known to deliver the fastest (in the multi-cyclic sense) speed of detection, whatever be the false alarm frequency. We offer a case study where we first carry out, step by step, statistical analysis of a set of real-world financial data, and then set up and devise (a) the proposed SR-based anomaly-detection procedure and (b) the celebrated Cumulative Sum (CUSUM) chart to detect structural breaks in the data. While both procedures performed well, the proposed SR-derivative, conforming to the intuition, seemed slightly better.

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