Searcharxiv⌕ Search

arXiv subjects

Yingying Li

Publications and source records attributed to Yingying Li.

60 records · Page 4Linked to original sources

Super-star networks: Growing optimal scale-free networks via likelihood

Preferential attachment --- by which new nodes attach to existing nodes with probability proportional to the existing nodes' degree --- has become the standard growth model for scale-free networks, where the asymptotic probability of a node having degree $k$ is proportional to $k^{-γ}$. However, the motivation for this model is entirely ad hoc. We use exact likelihood arguments and show that the optimal way to build a scale-free network is to attach most new links to nodes of low degree. Curiously, this leads to a scale-free networks with a single dominant hub: a star-like structure we call a super-star network. Asymptotically, the optimal strategy is to attach each new node to one of the nodes of degree $k$ with probability proportional to $\frac{1}{N+ζ(γ)(k+1)^γ}$ (in a $N$ node network) --- a stronger bias toward high degree nodes than exhibited by standard preferential attachment. Our algorithm generates optimally scale-free networks (the super-star networks) as well as randomly sampling the space of all scale-free networks with a given degree exponent $γ$. We generate viable realisation with finite $N$ for $1\ll γ<2$ as well as $γ>2$. We observe an apparently discontinuous transition at $γ\approx 2$ between so-called super-star networks and more tree-like realisations. Gradually increasing $γ$ further leads to re-emergence of a super-star hub. To quantify these structural features we derive a new analytic expression for the expected degree exponent of a pure preferential attachment process, and introduce alternative measures of network entropy. Our approach is generic and may also be applied to an arbitrary degree distribution.

nlin.AO↗

Volatility Inference in the Presence of Both Endogenous Time and Microstructure Noise

In this article we consider the volatility inference in the presence of both market microstructure noise and endogenous time. Estimators of the integrated volatility in such a setting are proposed, and their asymptotic properties are studied. Our proposed estimator is compared with the existing popular volatility estimators via numerical studies. The results show that our estimator can have substantially better performance when time endogeneity exists.

q-fin.ST↗

Statistical Properties of Microstructure Noise

We study the estimation of moments and joint moments of microstructure noise. Estimators of arbitrary order of (joint) moments are provided, for which we establish consistency as well as central limit theorems. In particular, we provide estimators of auto-covariances and auto-correlations of the noise. Simulation studies demonstrate excellent performance of our estimators even in the presence of jumps and irregular observation times. Empirical studies reveal (moderate) positive auto-correlation of the noise for the stocks tested.

stat.ME↗

On the estimation of integrated covariance matrices of high dimensional diffusion processes

We consider the estimation of integrated covariance (ICV) matrices of high dimensional diffusion processes based on high frequency observations. We start by studying the most commonly used estimator, the realized covariance (RCV) matrix. We show that in the high dimensional case when the dimension $p$ and the observation frequency $n$ grow in the same rate, the limiting spectral distribution (LSD) of RCV depends on the covolatility process not only through the targeting ICV, but also on how the covolatility process varies in time. We establish a Marčenko--Pastur type theorem for weighted sample covariance matrices, based on which we obtain a Marčenko--Pastur type theorem for RCV for a class $\mathcal{C}$ of diffusion processes. The results explicitly demonstrate how the time variability of the covolatility process affects the LSD of RCV. We further propose an alternative estimator, the time-variation adjusted realized covariance (TVARCV) matrix. We show that for processes in class $\mathcal {C}$, the TVARCV possesses the desirable property that its LSD depends solely on that of the targeting ICV through the Marčenko--Pastur equation, and hence, in particular, the TVARCV can be used to recover the empirical spectral distribution of the ICV by using existing algorithms.

stat.ME↗

Vast Volatility Matrix Estimation using High Frequency Data for Portfolio Selection

Portfolio allocation with gross-exposure constraint is an effective method to increase the efficiency and stability of selected portfolios among a vast pool of assets, as demonstrated in Fan et al (2008). The required high-dimensional volatility matrix can be estimated by using high frequency financial data. This enables us to better adapt to the local volatilities and local correlations among vast number of assets and to increase significantly the sample size for estimating the volatility matrix. This paper studies the volatility matrix estimation using high-dimensional high-frequency data from the perspective of portfolio selection. Specifically, we propose the use of "pairwise-refresh time" and "all-refresh time" methods proposed by Barndorff-Nielsen et al (2008) for estimation of vast covariance matrix and compare their merits in the portfolio selection. We also establish the concentration inequalities of the estimates, which guarantee desirable properties of the estimated volatility matrix in vast asset allocation with gross exposure constraints. Extensive numerical studies are made via carefully designed simulations. Comparing with the methods based on low frequency daily data, our methods can capture the most recent trend of the time varying volatility and correlation, hence provide more accurate guidance for the portfolio allocation in the next time period. The advantage of using high-frequency data is significant in our simulation and empirical studies, which consist of 50 simulated assets and 30 constituent stocks of Dow Jones Industrial Average index.

q-fin.PM↗

Are volatility estimators robust with respect to modeling assumptions?

We consider microstructure as an arbitrary contamination of the underlying latent securities price, through a Markov kernel $Q$. Special cases include additive error, rounding and combinations thereof. Our main result is that, subject to smoothness conditions, the two scales realized volatility is robust to the form of contamination $Q$. To push the limits of our result, we show what happens for some models that involve rounding (which is not, of course, smooth) and see in this situation how the robustness deteriorates with decreasing smoothness. Our conclusion is that under reasonable smoothness, one does not need to consider too closely how the microstructure is formed, while if severe non-smoothness is suspected, one needs to pay attention to the precise structure and also the use to which the estimator of volatility will be put.

q-fin.ST↗