Constructing Optimal Pathwise Confidence Bands Using Mixed-Integer Optimization
12 Pages Posted: 11 Dec 2015
Date Written: December 9, 2015
We address the question of how to construct optimal confidence bands with a predefined nominal coverage from a finite set of sample paths. We introduce a mixed-integer optimization algorithm to calculate globally optimal pathwise confidence bands. We illustrate the method with an example of realistic size.
Keywords: Pathwise confidence bands; Mixed-integer optimization
JEL Classification: C61; C53
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