Variance-gamma approximation via Stein's method

DOI10.1214/EJP.V19-3020MaRDI QIDQ2448527zbMATH OpenFDO

Authors Robert E. Gaunt

Publication date 2 May 2014

Published in Electronic Journal of Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1309.4422

zbMATH Keywords

rates of convergenceStein's methodvariance-gamma approximation

Mathematics Subject Classification ID

Central limit and other weak theorems (60F05)

Abstract: Variance-Gamma distributions are widely used in financial modelling and contain as special cases the normal, Gamma and Laplace distributions. In this paper we extend Stein's method to this class of distributions. In particular, we obtain a Stein equation and smoothness estimates for its solution. This Stein equation has the attractive property of reducing to the known normal and Gamma Stein equations for certain parameter values. We apply these results and local couplings to bound the distance between sums of the form $su{m}_{i,j,k=1}^{m,n,r}{X}_{ik}{Y}_{jk}$, where the $X_{ik}$ and $Y_{jk}$ are independent and identically distributed random variables with zero mean, by their limiting Variance-Gamma distribution. Through the use of novel symmetry arguments, we obtain a bound on the distance that is of order $m^{-1}+n^{-1}$ for smooth test functions. We end with a simple application to binary sequence comparison.

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