Constrained Mixture Models for Asset Returns Modelling

Iead Rezek

Papers from arXiv.org

Abstract: The estimation of asset return distributions is crucial for determining optimal trading strategies. In this paper we describe the constrained mixture model, based on a mixture of Gamma and Gaussian distributions, to provide an accurate description of price trends as being clearly positive, negative or ranging while accounting for heavy tails and high kurtosis. The model is estimated in the Expectation Maximisation framework and model order estimation also respects the model's constraints.

Date: 2011-03
New Economics Papers: this item is included in nep-fmk and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1103.2670

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