Generalized linear model for subordinated Lévy processes

Farouk Mselmi

Scandinavian Journal of Statistics, 2022, vol. 49, issue 2, 772-801

Abstract: Generalized linear models, introduced by Nelder and Wedderburn, allowed to model the regression of normal and nonnormal data. While doing so, the analysis of these models could not be obtained without the explicit form of the variance function. In this paper, we determine the link and variance functions of the natural exponential family generated by the class of subordinated Lévy processes. In this framework, we introduce a class of variance functions that depends on the Lambert function. In this regard, we call it the Lambert class, which covers the variance functions of the natural exponential families generated by the subordinated gamma processes and the subordinated Lévy processes by the Poisson subordinator. Notice that the gamma process subordinated by the Poisson one is excluded from this class. The concept of reciprocity in natural exponential families was given in order to obtain an exponential family from another one. In this context, we get the reciprocal class of the natural exponential family generated by the class of subordinated Lévy processes. It is well known that the variance function represents an essential element for the determination of the quasi‐likelihood and deviance functions. Then, we use the expression of our variance function in order to maintain them. This leads us to analyze the proposed generalized linear model. We illustrate some of our models with applications to the daily exchange rate returns of the Tunisian Dinar against the U.S. Dollar and the damage incidents of ships.

Date: 2022
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