arXiv subjects

Xuewen Yu

Publications and source records attributed to Xuewen Yu.

10 recordsLinked to original sources

arXiv2026

Near-Unit-Root Theory for Affine Processes

Discrete-time affine processes are widely used in finance and economics and encompass count, positive, and nonnegative-valued processes. This paper develops near-unit-root asymptotic theory for this class of models. Unlike linear AR(1) processes, affine processes exhibit time-varying conditional variance that remains asymptotically non-negligible near unity, leading to qualitatively different scaling limits and estimator behavior. We show that the local-to-unity regime suffers from the usual nuisance-parameter problem, whereas the mildly explosive regime, while free of it, still does not allow consistent estimation of the intercept. By contrast, the mildly stationary framework is more tractable: the OLS estimator is asymptotically normal, the resulting trajectories are more realistic than those of linear AR(1) models, and inference is possible through both a plug-in method or bootstrap. The theoretical results are supported by simulation evidence and illustrated through applications to insurance and financial data.

math.ST↗

arXiv2025

Large Structural VARs with Multiple Sign and Ranking Restrictions

Large VARs are increasingly used in structural analysis as a unified framework to study the impacts of multiple structural shocks simultaneously. However, the concurrent identification of multiple shocks using sign and ranking restrictions poses significant practical challenges to the point where existing algorithms cannot be used with such large VARs. To address this, we introduce a new numerically efficient algorithm that facilitates the estimation of impulse responses and related measures in large structural VARs identified with a large number of structural restrictions on impulse responses. The methodology is illustrated using a 35-variable VAR with over 100 sign and ranking restrictions to identify 8 structural shocks.

econ.EM↗

arXiv2023

Resource Adequacy and Capacity Procurement: Metrics and Decision Support Analysis

Resource adequacy studies typically use standard metrics such as Loss of Load Expectation and Expected Energy Unserved to quantify the risk of supply shortfalls. This paper critiques present approaches to adequacy assessment and capacity procurement in terms of their relevance to decision maker interests, before demonstrating alternatives including risk-averse metrics and visualisations of wider risk profile. This is illustrated with results for a Great Britain example, in which the risk profile varies substantially with the installed capacity of wind generation. This paper goes beyond previous literature through its critical discussion of how current practices reflect decision maker interests; and how decision making can be improved using a broader range of outputs available from standard models.

stat.AP↗

arXiv2022

Causal chain event graphs for remedial maintenance

The analysis of system reliability has often benefited from graphical tools such as fault trees and Bayesian networks. In this article, instead of conventional graphical tools, we apply a probabilistic graphical model called the chain event graph (CEG) to represent the failures and processes of deterioration of a system. The CEG is derived from an event tree and can flexibly represent the unfolding of asymmetric processes. For this application we need to define a new class of formal intervention we call remedial to model causal effects of remedial maintenance. This fixes the root causes of a failure and returns the status of the system to as good as new. We demonstrate that the semantics of the CEG are rich enough to express this novel type of intervention. Furthermore through the bespoke causal algebras the CEG provides a transparent framework with which guide and express the rationale behind predictive inferences about the effects of various different types of remedial intervention. A back-door theorem is adapted to apply to these interventions to help discover when a system is only partially observed.

stat.ME↗

arXiv2022

Large Bayesian VARs with Factor Stochastic Volatility: Identification, Order Invariance and Structural Analysis

Vector autoregressions (VARs) with multivariate stochastic volatility are widely used for structural analysis. Often the structural model identified through economically meaningful restrictions--e.g., sign restrictions--is supposed to be independent of how the dependent variables are ordered. But since the reduced-form model is not order invariant, results from the structural analysis depend on the order of the variables. We consider a VAR based on the factor stochastic volatility that is constructed to be order invariant. We show that the presence of multivariate stochastic volatility allows for statistical identification of the model. We further prove that, with a suitable set of sign restrictions, the corresponding structural model is point-identified. An additional appeal of the proposed approach is that it can easily handle a large number of dependent variables as well as sign restrictions. We demonstrate the methodology through a structural analysis in which we use a 20-variable VAR with sign restrictions to identify 5 structural shocks.

econ.EM↗

arXiv2022

Fast and Accurate Variational Inference for Large Bayesian VARs with Stochastic Volatility

We propose a new variational approximation of the joint posterior distribution of the log-volatility in the context of large Bayesian VARs. In contrast to existing approaches that are based on local approximations, the new proposal provides a global approximation that takes into account the entire support of the joint distribution. In a Monte Carlo study we show that the new global approximation is over an order of magnitude more accurate than existing alternatives. We illustrate the proposed methodology with an application of a 96-variable VAR with stochastic volatility to measure global bank network connectedness.

econ.EM↗

arXiv2021

Large Order-Invariant Bayesian VARs with Stochastic Volatility

Many popular specifications for Vector Autoregressions (VARs) with multivariate stochastic volatility are not invariant to the way the variables are ordered due to the use of a Cholesky decomposition for the error covariance matrix. We show that the order invariance problem in existing approaches is likely to become more serious in large VARs. We propose the use of a specification which avoids the use of this Cholesky decomposition. We show that the presence of multivariate stochastic volatility allows for identification of the proposed model and prove that it is invariant to ordering. We develop a Markov Chain Monte Carlo algorithm which allows for Bayesian estimation and prediction. In exercises involving artificial and real macroeconomic data, we demonstrate that the choice of variable ordering can have non-negligible effects on empirical results. In a macroeconomic forecasting exercise involving VARs with 20 variables we find that our order-invariant approach leads to the best forecasts and that some choices of variable ordering can lead to poor forecasts using a conventional, non-order invariant, approach.

econ.EM↗

arXiv2021

Hierarchical Causal Analysis of Natural Languages on a Chain Event Graph

Various graphical models are widely used in reliability to provide a qualitative description of domain experts hypotheses about how a system might fail. Here we argue that the semantics developed within standard causal Bayesian networks are not rich enough to fully capture the intervention calculus needed for this domain and a more tree-based approach is necessary. We instead construct a Bayesian hierarchical model with a chain event graph at its lowest level so that typical interventions made in reliability models are supported by a bespoke causal calculus. We then demonstrate how we can use this framework to automate the process of causal discovery from maintenance logs, extracting natural language information describing hypothesised causes of failures. Through our customised causal algebra we are then able to make predictive inferences about the effects of a variety of types of remedial interventions. The proposed methodology is illustrated throughout with examples drawn from real maintenance logs.

math.ST↗

arXiv2021

Building A Bayesian Decision Support System for Evaluating COVID-19 Countermeasure Strategies

Decision making in the face of a disaster requires the consideration of several complex factors. In such cases, Bayesian multi-criteria decision analysis provides a framework for decision making. In this paper, we present how to construct a multi-attribute decision support system for choosing between countermeasure strategies, such as lockdowns, designed to mitigate the effects of COVID-19. Such an analysis can evaluate both the short term and long term efficacy of various candidate countermeasures. The expected utility scores of a countermeasure strategy capture the expected impact of the policies on health outcomes and other measures of population well-being. The broad methodologies we use here have been established for some time. However, this application has many novel elements to it: the pervasive uncertainty of the science; the necessary dynamic shifts between regimes within each candidate suite of countermeasures; and the fast moving stochastic development of the underlying threat all present new challenges to this domain. Our methodology is illustrated by demonstrating in a simplified example how the efficacy of various strategies can be formally compared through balancing impacts of countermeasures, not only on the short term (e.g. COVID-19 deaths) but the medium to long term effects on the population (e.g increased poverty).

stat.AP↗

arXiv2020

Bayesian Learning of Causal Relationships for System Reliability

Causal theory is now widely developed with many applications to medicine and public health. However within the discipline of reliability, although causation is a key concept in this field, there has been much less theoretical attention. In this paper, we will demonstrate how some aspects of established causal methodology can be translated via trees, and more specifically chain event graphs, into domain of reliability theory to help the probability modeling of failures. We further show how various domain specific concepts of causality particular to reliability can be imported into more generic causal algebras and so demonstrate how these disciplines can inform each other. This paper is informed by a detailed analysis of maintenance records associated with a large electrical distribution company. Causal hypotheses embedded within these natural language texts are extracted and analyzed using the new graphical framework we introduced here.

cs.AI↗