OPTIMAL PREDICTION OF CATASTROPHES IN AUTOREGRESSIVE MOVING‐AVERAGE PROCESSES

A. Svensson, J. Holst, R. Lindquist and G. Lindgren

Journal of Time Series Analysis, 1996, vol. 17, issue 5, 511-531

Abstract: Abstract. This paper presents an optimal predictor of level crossings, catastrophes, for autoregressive moving‐average processes, and investigates the performance of the predictor. The optimal catastrophe predictor is the predictor that gives a minimal number of false alarms for a fixed detection probability. As a tool for evaluating, comparing and constructing the predictors a method using operating characteristics, i.e. the probability of correct alarm and the probability of detecting a catastrophe for the predictor, is used. An explicit condition for the optimal catastrophe predictor based on linear prediction of future process values is given and compared with a naive catastrophe predictor, which alarms when the predicted process values exceed a given level, and with some different approximations of the optimal predictor. Simulations of the different algorithms are presented, and the performance is shown to agree with the theoretical results. All results indicate that the optimal catastrophe predictor is far better than the naive predictor. They also show that it is possible to construct an approximate catastrophe predictor requiring fewer computations without losing too much of the optimal predictor performance.

Date: 1996
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