A Note on ‘Good Starting Values’ in Numerical Optimisation

7 Pages Posted: 3 Jun 2010 Last revised: 16 Sep 2010

See all articles by Manfred Gilli

Manfred Gilli

University of Geneva - Research Center for Statistics; Swiss Finance Institute

Enrico Schumann

Independent

Date Written: June 3, 2010

Abstract

Many optimisation problems in finance and economics have multiple local optima or discontinuities in their objective functions. In such cases it is stressed that ‘good starting points are important’. We look into a particular example: calibrating a yield curve model. We find that while ‘good starting values’ suggested in the literature produce parameters that are indeed ‘good’, a simple best-of-n-restarts strategy with random starting points gives results that are never worse, but better in many cases.

Keywords: numerical optimisation, Nelson-Siegel, Nelson-Siegel-Svensson, optimisation heuristics

JEL Classification: C61, C13

Suggested Citation

Gilli, Manfred and Schumann, Enrico, A Note on ‘Good Starting Values’ in Numerical Optimisation (June 3, 2010). Available at SSRN: https://ssrn.com/abstract=1620083 or http://dx.doi.org/10.2139/ssrn.1620083

Manfred Gilli

University of Geneva - Research Center for Statistics ( email )

Geneva
Switzerland
+41223798222 (Phone)
+41223798299 (Fax)

HOME PAGE: http://www.unige.ch/ses/metri/gilli/

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Enrico Schumann (Contact Author)

Independent ( email )

No Address Available

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