Bayesian nonparametric forecasting of monotonic functional time series

DOI10.1214/16-EJS1190zbMATH Open1357.62278arXiv1608.08056OpenAlexW3101948118MaRDI QIDQ502800FDOQ502800

Authors: Matteo Ruggiero, Antonio Canale 

Publication date: 11 January 2017

Published in: Electronic Journal of Statistics (Search for Journal in Brave)

Abstract: We propose a Bayesian nonparametric approach to modelling and predicting a class of functional time series with application to energy markets, based on fully observed, noise-free functional data. Traders in such contexts conceive profitable strategies if they can anticipate the impact of their bidding actions on the aggregate demand and supply curves, which in turn need to be predicted reliably. Here we propose a simple Bayesian nonparametric method for predicting such curves, which take the form of monotonic bounded step functions. We borrow ideas from population genetics by defining a class of interacting particle systems to model the functional trajectory, and develop an implementation strategy which uses ideas from Markov chain Monte Carlo and approximate Bayesian computation techniques and allows to circumvent the intractability of the likelihood. Our approach shows great adaptation to the degree of smoothness of the curves and the volatility of the functional series, proves to be robust to an increase of the forecast horizon and yields an uncertainty quantification for the functional forecasts. We illustrate the model and discuss its performance with simulated datasets and on real data relative to the Italian natural gas market.

Full work available at URL: https://arxiv.org/abs/1608.08056

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zbMATH Keywords

Markov chainpredictionMonte Carloapproximate Bayesian computationDirichlet processinteracting particle systemMoran modelPolya urndependent processes

Mathematics Subject Classification ID

Computational methods in Markov chains (60J22) Bayesian inference (62F15) Nonparametric estimation (62G05) Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Applications of statistics to economics (62P20) Monte Carlo methods (65C05) Inference from stochastic processes and prediction (62M20) Interacting random processes; statistical mechanics type models; percolation theory (60K35)

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• Wavelet-\(L_2 E\) stochastic volatility models: an application to the water-energy nexus
• Approximating Bayes in the 21st century

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