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# Questions tagged [estimation]

The calculated approximation of a result which is usable even if input data may be incomplete or uncertain.

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### What methods do you use to improve expected return estimates when constructing a portfolio in a mean-variance framework?

One of the main problems when trying to apply mean-variance portfolio optimization in practice is its high input sensitivity. As can be seen in (Chopra, 1993) using historical values to estimate ...
3k views

### Tools in R for estimating time-varying copulas?

Are there libraries in R for estimating time-varying joint distributions via copulas? Hedibert Lopes has an excellent paper on the topic here. I know there is an existing packaged called copula but ...
223 views

### Estimating implied volatility of an index component with no vanilla options market

There are liquid vanilla options trading on an index of 20 equity components. The question is how to price an option on one of the index components, knowing that there are no options trading on that ...
2k views

### How to estimate the probability of drawdown / ruin?

A fairly naive approach to estimate the probability of drawdown / ruin is to calculate the probabilities of all the permutations of your sample returns, keeping track of those that hit your drawdown / ...
432 views

### What distribution should I apply to estimate the likelihood of extreme returns?

Say I have a limited sample, a month of daily returns, and I want to estimate the 99.5th percentile of the distribution of absolute daily returns. Because the estimate will require extrapolation, I ...
2k views

### Estimating correlation using EWMA

I am using an EWMA model to evaluate the correlation between yearly time series. I know Riskmetrics uses $\lambda=0.94$ for daily data and $\lambda=0.97$ for monthly data. Is there a value ...
Suppose I want to calculate VaR for a known distribution with mean $\mu$, variance $\sigma^2$ and $\alpha$-quantile as, $VaR_{\alpha}$ = $\mu + \sigma q_{\alpha}$. For a Gaussian distribution it is ...