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Matching a Distribution by Matching Quantiles Estimation.

Authors :
Sgouropoulos, Nikolaos
Yao, Qiwei
Yastremiz, Claudia
Source :
Journal of the American Statistical Association. Jun2015, Vol. 110 Issue 510, p742-759. 18p.
Publication Year :
2015

Abstract

Motivated by the problem of selecting representative portfolios for backtesting counterparty credit risks, we propose a matching quantiles estimation (MQE) method for matching a target distribution by that of a linear combination of a set of random variables. An iterative procedure based on the ordinary least-squares estimation (OLS) is proposed to compute MQE. MQE can be easily modified by adding a LASSO penalty term if a sparse representation is desired, or by restricting the matching within certain range of quantiles to match a part of the target distribution. The convergence of the algorithm and the asymptotic properties of the estimation, both with or without LASSO, are established. A measure and an associated statistical test are proposed to assess the goodness-of-match. The finite sample properties are illustrated by simulation. An application in selecting a counterparty representative portfolio with a real dataset is reported. The proposed MQE also finds applications in portfolio tracking, which demonstrates the usefulness of combining MQE with LASSO. [ABSTRACT FROM AUTHOR]

Details

Language :
English
ISSN :
01621459
Volume :
110
Issue :
510
Database :
Academic Search Index
Journal :
Journal of the American Statistical Association
Publication Type :
Academic Journal
Accession number :
103686422
Full Text :
https://doi.org/10.1080/01621459.2014.929522