Dynamic quantile function models
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Publication:5039628
DOI10.1080/14697688.2022.2053193zbMATH Open1500.91129arXiv1707.02587OpenAlexW3122570689MaRDI QIDQ5039628FDOQ5039628
Gareth W. Peters, S. A. Sisson, Richard Gerlach, Wilson Y. Chen
Publication date: 30 September 2022
Published in: Quantitative Finance (Search for Journal in Brave)
Abstract: Motivated by the need for effectively summarising, modelling, and forecasting the distributional characteristics of intra-daily returns, as well as the recent work on forecasting histogram-valued time-series in the area of symbolic data analysis, we develop a time-series model for forecasting quantile-function-valued (QF-valued) daily summaries for intra-daily returns. We call this model the dynamic quantile function (DQF) model. Instead of a histogram, we propose to use a -and- quantile function to summarise the distribution of intra-daily returns. We work with a Bayesian formulation of the DQF model in order to make statistical inference while accounting for parameter uncertainty; an efficient MCMC algorithm is developed for sampling-based posterior inference. Using ten international market indices and approximately 2,000 days of out-of-sample data from each market, the performance of the DQF model compares favourably, in terms of forecasting VaR of intra-daily returns, against the interval-valued and histogram-valued time-series models. Additionally, we demonstrate that the QF-valued forecasts can be used to forecast VaR measures at the daily timescale via a simple quantile regression model on daily returns (QR-DQF). In certain markets, the resulting QR-DQF model is able to provide competitive VaR forecasts for daily returns.
Full work available at URL: https://arxiv.org/abs/1707.02587
Nonparametric regression and quantile regression (62G08) Applications of statistics to actuarial sciences and financial mathematics (62P05) Financial markets (91G15)
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Cited In (4)
- Dynamic quantile models
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- A semi-parametric conditional autoregressive joint value-at-risk and expected shortfall modeling framework incorporating realized measures
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