network profile
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| visits | member for | 5 months |
| seen | Mar 1 at 18:23 | |
| stats | profile views | 5 |
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Mar 1 |
comment |
Optimization procedure for entropy pooling 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. |
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Feb 28 |
awarded | Editor |
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Feb 28 |
revised |
Optimization procedure for entropy pooling added 163 characters in body; edited body |
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Feb 28 |
asked | Optimization procedure for entropy pooling |
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Nov 27 |
comment |
Does entropy pooling apply to distributions with time-varying drift? In this case it's possible to simulate the distribution of log returns if I fix my investment horizon, then my drift becomes just a constant at the projected horizon. I actually have the exact case that you describe, where I have an unsustainable regime that will change at some critical point (incorporated in the model) and then reverts back to a steady state. I am curious as how you would set up a dynamic framework, I'm not sure I understand this part correctly: "treating the distribution at every horizon as one distribution", it's not the same distribution at every horizon right ? |
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Nov 27 |
comment |
Does entropy pooling apply to distributions with time-varying drift? I also think it's possible, however it didn't show clearly in his paper that his model parameters (normal or fat-tailed) could be time-varying. I can send you the paper if you want to have a look at it. |
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Nov 27 |
comment |
Does entropy pooling apply to distributions with time-varying drift? I had the same concern that we need a market invariant for asset allocation, but from what I see in the Meucci paper "The Prayer", invariance is needed to project the invariant distribution to the investment horizon. In my case however, I already have the projection and the pricing step at the investment horizon with my time-varying drift. Provided I fix my investment horizon, my drift becomes known. I don't think the quest for invariance should be something to always strive for, since there is large evidence that bubble regimes, for example, typically break the invariance. |
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Nov 27 |
awarded | Supporter |
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Nov 26 |
awarded | Student |
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Nov 26 |
asked | Does entropy pooling apply to distributions with time-varying drift? |
