001 Business School Discipline of Finance Discussion Paper 2014 - 001 “ Cluster PIN : A new estimation method for the probability of informed trading ”
نویسندگان
چکیده
" Cluster PIN: A new estimation method for the probability of informed trading " Abstract We present a new method for estimating the probability of informed trading (PIN). This method, called Cluster PIN (CPIN), is based on cluster analysis used in machine learning. CPIN does not require maximum likelihood estimation and thus avoids the computational issues that have been associated with some previous PIN estimation routines. We _nd that CPIN is more than 700 times faster than the best existing estimation method, and has comparable accuracy. A further practical advantage is that CPIN can be used to identify initial parameter conditions for existing maximum likelihood estimation methods. This hybrid of CPIN and maximum likelihood estimation yields the best practical combination of estimation speed and accuracy.
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