Learning Volatility of Discrete Time Series Using Prediction with Expert Advice

  • Vladimir V. V’yugin
Part of the Lecture Notes in Computer Science book series (LNCS, volume 5792)

Abstract

In this paper the method of prediction with expert advice is applied for learning volatility of discrete time series. We construct arbitrage strategies (or experts) which suffer gain when “micro” and “macro” volatilities of a time series differ. For merging different expert strategies in a strategy of the learner, we use some modification of Kalai and Vempala algorithm of following the perturbed leader where weights depend on current gains of the experts. We consider the case when experts one-step gains can be unbounded. New notion of a volume of a game vt is introduced. We show that our algorithm has optimal performance in the case when the one-step increments \({\it \Delta} v_t=v_t-v_{t-1}\) of the volume satisfy \({\it \Delta} v_t=o(v_t)\) as t → ∞.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2009

Authors and Affiliations

  • Vladimir V. V’yugin
    • 1
  1. 1.Institute for Information Transmission ProblemsRussian Academy of SciencesMoscowRussia

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