Quantifying uncertainty with a derivative tracking SDE model and application to wind power forecast data

DOI10.1007/S11222-021-10040-8MaRDI QIDQ2058882zbMATHOpenAlexFDO

Authors Renzo Caballero, Ahmed Kebaier, Marco Scavino, R. Tempone

Publication date 10 December 2021

Published in Statistics and Computing (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2006.15907

zbMATH Keywords

model selectionuncertainty quantificationwind powerforecasting errorfixed-point likelihood numerical optimizationLamperti spacetime-inhomogeneous Jacobi diffusion

Mathematics Subject Classification ID

Computational methods for problems pertaining to statistics (62-08) Numerical optimization and variational techniques (65K10) Inference from stochastic processes and prediction (62M20) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10)

Abstract: We develop a data-driven methodology based on parametric It^{o}'s Stochastic Differential Equations (SDEs) to capture the real asymmetric dynamics of forecast errors. Our SDE framework features time-derivative tracking of the forecast, time-varying mean-reversion parameter, and an improved state-dependent diffusion term. Proofs of the existence, strong uniqueness, and boundedness of the SDE solutions are shown under a principled condition for the time-varying mean-reversion parameter. Inference based on approximate likelihood, constructed through the moment-matching technique both in the original forecast error space and in the Lamperti space, is performed through numerical optimization procedures. We propose another contribution based on the fixed-point likelihood optimization approach in the Lamperti space. All the procedures are agnostic of the forecasting technology, and they enable comparisons between different forecast providers. We apply our SDE framework to model historical Uruguayan normalized wind power production and forecast data between April and December 2019. Sharp empirical confidence bands of future wind power production are obtained for the best-selected model.

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Cited in

(1)

• Probabilistic forecasts of wind power generation by stochastic differential equation models

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