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I was wondering if those who used the entropy pooling code provided by Attilio Meucci had issues with the optimization procedure (especially regarding the fminunc function in Matlab). When I stress for example the expectation and the volatility, I get weird results for some stress values Stock price distribution with stress values 100 for expectation and 20 for volatility, prior in blue, posterior in red

and the following warning:

Local minimum possible:
fminunc stopped because the final change in function value relative to 
its initial value is less than the selected value of the function tolerance.

How can one deal with this ?

For information, the image represents a stock price distribution with stress values 100 for expectation and 20 for volatility, prior in blue, posterior in red.

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Can you show us your data? –  Bob Jansen Feb 28 '13 at 18:35
2  
I have noticed that taking extreme views can tend to cause problems (the effective number of simulations being low is usually a good sign). One simple way to check the results is to assume it is a normal distribution and take the views using the analytical formula and see how the results change. –  John Mar 1 '13 at 0:03
1  
Thanks John, I compared the results with the normal distribution, and the numerical solution indeed does not match the analytical solution when I apply extreme views on expectation or volatility. For those interested, the solution is in section 4 of the "Fully flexible extreme views" paper, a Gauss-Hermite grid solves the problem. –  Bytesize Mar 1 '13 at 14:26

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