Robust Parameter Estimation for Financial Data Simulation

Lee, David (2025): Robust Parameter Estimation for Financial Data Simulation.

Abstract

Financial market data are known to be far from normal and replete with outliers, i.e., “dirty” data that contain errors. Data errors introduce extreme or aberrant data points that can significantly distort parameter estimation results. This paper proposes a robust estimation approach to achieve stable and accurate results. The robust estimation approach is particularly applicable for financial data that often features the three situations we are protecting against: occasional rogue values (outliers), small errors and underlying non-normality.

• Item Type: MPRA Paper
• Language: English
• Keywords: robust parameter estimation, financial market data, market data simulation, risk factor.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation

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