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Matching a Distribution by Matching Quantiles Estimation.
- 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