Order selection of continuous time models: Applications to estimation of risk premiums

G. Basak; Ngai Hang Chan; P. P.K. Lee

doi:10.1109/CIFER.2003.1196274

Order selection of continuous time models: Applications to estimation of risk premiums

G. Basak, Ngai Hang Chan, P. P.K. Lee

Research output: Chapters, Conference Papers, Creative and Literary Works › RGC 32 - Refereed conference paper (with host publication) › peer-review

1 Citation (Scopus)

Abstract

This paper develops an order selection criterion for a continuous autoregressive (CAR) time series. Based on the quadratic variation consideration of a CAR(p) process, a new order selection criterion, the quadratic variation criterion (QVC) is proposed. It is shown that this new order selection criterion is consistent and provides an effective means to estimate the order of a CAR(p) model. Simulation studies suggest that the proposed method is efficient and outperforms other order selection criteria. The QVC is applied to select the order of the cumulative excess return process and the effect of the risk premium of a GARCH-M model when changing variance is taken into account.

Original language	English
Title of host publication	2003 IEEE International Conference on Computational Intelligence for Financial Engineering, CIFEr 2003 - Proceedings
Publisher	IEEE
Pages	293-300
Volume	2003-January
ISBN (Print)	0780376544
DOIs	https://doi.org/10.1109/CIFER.2003.1196274
Publication status	Published - 2003
Externally published	Yes
Event	2003 IEEE International Conference on Computational Intelligence for Financial Engineering, CIFEr 2003 - Hong Kong, China Duration: 20 Mar 2003 → 23 Mar 2003

Publication series

Name	IEEE/IAFE Conference on Computational Intelligence for Financial Engineering, Proceedings (CIFEr)
Volume	2003-January

Conference

Conference	2003 IEEE International Conference on Computational Intelligence for Financial Engineering, CIFEr 2003
Place	China
City	Hong Kong
Period	20/03/03 → 23/03/03

Bibliographical note

Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

Research Keywords

Continuous time systems
Differential equations
Finance
Integral equations
Mathematics
Maximum likelihood estimation
Random variables
Statistics
Stochastic processes
Virtual colonoscopy

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Basak, G., Chan, N. H., & Lee, P. P. K. (2003). Order selection of continuous time models: Applications to estimation of risk premiums. In 2003 IEEE International Conference on Computational Intelligence for Financial Engineering, CIFEr 2003 - Proceedings (Vol. 2003-January, pp. 293-300). Article 1196274 (IEEE/IAFE Conference on Computational Intelligence for Financial Engineering, Proceedings (CIFEr); Vol. 2003-January). IEEE. https://doi.org/10.1109/CIFER.2003.1196274

Basak, G. ; Chan, Ngai Hang ; Lee, P. P.K. / Order selection of continuous time models : Applications to estimation of risk premiums. 2003 IEEE International Conference on Computational Intelligence for Financial Engineering, CIFEr 2003 - Proceedings. Vol. 2003-January IEEE, 2003. pp. 293-300 (IEEE/IAFE Conference on Computational Intelligence for Financial Engineering, Proceedings (CIFEr)).

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title = "Order selection of continuous time models: Applications to estimation of risk premiums",

abstract = "This paper develops an order selection criterion for a continuous autoregressive (CAR) time series. Based on the quadratic variation consideration of a CAR(p) process, a new order selection criterion, the quadratic variation criterion (QVC) is proposed. It is shown that this new order selection criterion is consistent and provides an effective means to estimate the order of a CAR(p) model. Simulation studies suggest that the proposed method is efficient and outperforms other order selection criteria. The QVC is applied to select the order of the cumulative excess return process and the effect of the risk premium of a GARCH-M model when changing variance is taken into account.",

keywords = "Continuous time systems, Differential equations, Finance, Integral equations, Mathematics, Maximum likelihood estimation, Random variables, Statistics, Stochastic processes, Virtual colonoscopy",

author = "G. Basak and Chan, {Ngai Hang} and Lee, {P. P.K.}",

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Basak, G, Chan, NH & Lee, PPK 2003, Order selection of continuous time models: Applications to estimation of risk premiums. in 2003 IEEE International Conference on Computational Intelligence for Financial Engineering, CIFEr 2003 - Proceedings. vol. 2003-January, 1196274, IEEE/IAFE Conference on Computational Intelligence for Financial Engineering, Proceedings (CIFEr), vol. 2003-January, IEEE, pp. 293-300, 2003 IEEE International Conference on Computational Intelligence for Financial Engineering, CIFEr 2003, Hong Kong, China, 20/03/03. https://doi.org/10.1109/CIFER.2003.1196274

Order selection of continuous time models: Applications to estimation of risk premiums. / Basak, G.; Chan, Ngai Hang; Lee, P. P.K.
2003 IEEE International Conference on Computational Intelligence for Financial Engineering, CIFEr 2003 - Proceedings. Vol. 2003-January IEEE, 2003. p. 293-300 1196274 (IEEE/IAFE Conference on Computational Intelligence for Financial Engineering, Proceedings (CIFEr); Vol. 2003-January).

Research output: Chapters, Conference Papers, Creative and Literary Works › RGC 32 - Refereed conference paper (with host publication) › peer-review

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T2 - 2003 IEEE International Conference on Computational Intelligence for Financial Engineering, CIFEr 2003

AU - Basak, G.

AU - Chan, Ngai Hang

AU - Lee, P. P.K.

N1 - Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

PY - 2003

Y1 - 2003

N2 - This paper develops an order selection criterion for a continuous autoregressive (CAR) time series. Based on the quadratic variation consideration of a CAR(p) process, a new order selection criterion, the quadratic variation criterion (QVC) is proposed. It is shown that this new order selection criterion is consistent and provides an effective means to estimate the order of a CAR(p) model. Simulation studies suggest that the proposed method is efficient and outperforms other order selection criteria. The QVC is applied to select the order of the cumulative excess return process and the effect of the risk premium of a GARCH-M model when changing variance is taken into account.

AB - This paper develops an order selection criterion for a continuous autoregressive (CAR) time series. Based on the quadratic variation consideration of a CAR(p) process, a new order selection criterion, the quadratic variation criterion (QVC) is proposed. It is shown that this new order selection criterion is consistent and provides an effective means to estimate the order of a CAR(p) model. Simulation studies suggest that the proposed method is efficient and outperforms other order selection criteria. The QVC is applied to select the order of the cumulative excess return process and the effect of the risk premium of a GARCH-M model when changing variance is taken into account.

KW - Continuous time systems

KW - Differential equations

KW - Finance

KW - Integral equations

KW - Mathematics

KW - Maximum likelihood estimation

KW - Random variables

KW - Statistics

KW - Stochastic processes

KW - Virtual colonoscopy

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U2 - 10.1109/CIFER.2003.1196274

DO - 10.1109/CIFER.2003.1196274

M3 - RGC 32 - Refereed conference paper (with host publication)

SN - 0780376544

VL - 2003-January

T3 - IEEE/IAFE Conference on Computational Intelligence for Financial Engineering, Proceedings (CIFEr)

SP - 293

EP - 300

BT - 2003 IEEE International Conference on Computational Intelligence for Financial Engineering, CIFEr 2003 - Proceedings

PB - IEEE

Y2 - 20 March 2003 through 23 March 2003

ER -

Basak G, Chan NH, Lee PPK. Order selection of continuous time models: Applications to estimation of risk premiums. In 2003 IEEE International Conference on Computational Intelligence for Financial Engineering, CIFEr 2003 - Proceedings. Vol. 2003-January. IEEE. 2003. p. 293-300. 1196274. (IEEE/IAFE Conference on Computational Intelligence for Financial Engineering, Proceedings (CIFEr)). doi: 10.1109/CIFER.2003.1196274

Order selection of continuous time models: Applications to estimation of risk premiums

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