Non-parametric cumulants approach for outlier detection of multivariate financial data

Francesco Cesarone, Rosella Giacometti and Jacopo Maria Ricci

Papers from arXiv.org

Abstract: In this paper, we propose an outlier detection algorithm for multivariate data based on their projections on the directions that maximize the Cumulant Generating Function (CGF). We prove that CGF is a convex function, and we characterize the CGF maximization problem on the unit n-circle as a concave minimization problem. Then, we show that the CGF maximization approach can be interpreted as an extension of the standard principal component technique. Therefore, for validation and testing, we provide a thorough comparison of our methodology with two other projection-based approaches both on artificial and real-world financial data. Finally, we apply our method as an early detector for financial crises.

Date: 2023-05
New Economics Papers: this item is included in nep-ecm
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