Class AhatEstimation
- java.lang.Object
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- tech.nmfin.meanreversion.daspremont2008.AhatEstimation
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public class AhatEstimation extends Object
Estimates the coefficient of a VAR(1) model by penalized maximum likelihood. The vector autoregressive process is: \[ S_{t}=S_{t-1}A+Z_{t} \] \(S_{t}\) is the portfolio process, \(A\) the coefficient matrix, and \(Z_{t}\) a vector of i.i.d. Gaussian noise. The penalized maximum likelihood problem is (eq. 15 in the reference): \[ a_{i}=\arg\min_{x} ||S_{it}-S_{t-1}x||^{2}+\gamma ||x||_{1} \] where \(a_{i}\) is the i-th column of \(A\).
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Constructor Summary
Constructors Constructor Description AhatEstimation(Matrix St, Matrix St_m1, double gamma)
Estimates the coefficient matrix of a vector autoregressive process of order 1.
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Method Detail
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compute
public Matrix compute()
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