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Dynamic semi-parametric factor model for functional expectiles

  • Petra BurdejováEmail author
  • Wolfgang K. Härdle
Original paper
  • 25 Downloads

Abstract

High-frequency data can provide us with a quantity of information for forecasting and help to calculate and prevent the future risk based on extremes. This tail behaviour is very often driven by exogenous components and may be modelled conditionally on other variables. However, many of these phenomena are observed over time, exhibiting non-trivial dynamics and dependencies. We propose a functional dynamic factor model to study the dynamics of expectile curves. The complexity of the model and the number of dependent variables are reduced by lasso penalization. The functional factors serve as a low-dimensional representation of the conditional tail event, while the time-variation is captured by factor loadings. We illustrate the model with an application to climatology, where daily data over years on temperature, rainfalls or strength of wind are available.

Keywords

Factor model Functional data Expectiles Extremes 

Notes

References

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Humboldt-Universität zu BerlinBerlinGermany
  2. 2.Sim Kee Boon Institute for Financial EconomicsSingapore Management UniversitySingaporeSingapore

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