The effect of parameter estimation on Phase II control chart performance in monitoring financial GARCH processes with contaminated data

Authors

  • Amirhossein Amiri Department of Industrial Engineering, Faculty of Engineering, Shahed University, Tehran, Iran.
  • Hojatollah Sadeghi Department of Business Management, Faculty of Economics, Yazd University, Yazd, Iran
Abstract:

The application of control charts for monitoring financial processes has received a greater focus after recent global crisis. The Generelized AutoRegressive Conditional Heteroskedasticity (GARCH) time series model is widely applied for modelling financial processes. Therefore, traditional Shewhart control chart is developed to monitor GARCH processes. There are some difficulties in financial surveillance especially in the retrospective phase one of which being the posibility of existing outliers in the samples data. For this aim, in this paper some methods were proposed to estimate the parameters of the GARCH model based on maximum likelihood and robust estimation procedures. Then, the performance of Phase II residual Shewhart control chart with estimated parameters was evaluated according to in-control Average Run Length in the presence of outliers. The Monte Carlo simulation study was applied to evaluate the proposed methods considering different numerical examples. Finally, the US Dollar/Iran Rial (USD/IRR) exchange rate was considered for monitoring in which the results showed that the control chart was more sensitive when the robust methods were applied in the estimation procedure.

Upgrade to premium to download articles

Sign up to access the full text

Already have an account?login

similar resources

Effect of Phase I Estimation on Phase II Control Chart Performance with Profile Data

This paper illustrates how Phase I estimators in statistical process control (SPC) can affect the performance of Phase II control charts. The deleterious impact of poor Phase I estimators on the performance of Phase II control charts is illustrated in the context of profile monitoring. Two types of Phase I estimators are discussed. One approach uses functional cluster analysis to initially dist...

full text

Monitoring Financial Processes with ARMA-GARCH Model Based on Shewhart Control Chart (Case Study: Tehran Stock Exchange)

Financial surveillance is an interesting area after financial crisis in recent years. In this subject, important financial indices are monitored using control charts. Control chart is a powerful instrument for detecting assignable causes which is considerably developed in industrial and service environments. In this paper, a monitoring procedure based on Shewhart control chart is proposed to mo...

full text

New phase II control chart for monitoring ordinal contingency table based processes

In some statistical process monitoring applications, quality of a process or product is described by more than one ordinal factors called ordinal multivariate process. To show the relationship between these factors, an ordinal contingency table is used and modeled with ordinal log-linear model. In this paper, a new control charts based on ordinal-normal statistic is developed to monitor the ord...

full text

The Effect of Estimation Error on Risk-adjusted Bernoulli GEWMA Control Chart in Multistage Healthcare Processes

Background and objectives: Risk-adjusted Bernoulli control chart is one of the main tools for monitoring multistage healthcare processes to achieve higher performance and effectiveness in healthcare settings. Using parameter estimates can lead to significantly deteriorate chart performance. However, so far, the effect of estimation error on this chart in which healthcare ...

full text

the effect of task cognitive complexity and time limit on the performance of the learners with different proficiency levels in second language writing skill

this study investigated the effects of manipulating the cognitive complexity of tasks along +/- few elements and the time limits on l2 learners writing performance. to conduct the study, 60 iranian efl learners with two levels of proficiency, low and high intermediate, were selected and assigned to three groups based on the time devoted to task completion. the participants performed both a simp...

15 صفحه اول

the washback effect of discretepoint vs. integrative tests on the retention of content in knowledge tests

در این پایان نامه تاثیر دو نوع تست جزیی نگر و کلی نگر بر به یادسپاری محتوا ارزیابی شده که نتایج نشان دهندهکارایی تستهای کلی نگر بیشتر از سایر آزمونها است

15 صفحه اول

My Resources

Save resource for easier access later

Save to my library Already added to my library

{@ msg_add @}


Journal title

volume 10  issue special issue on Quality Control and Reliability

pages  93- 108

publication date 2017-06-27

By following a journal you will be notified via email when a new issue of this journal is published.

Hosted on Doprax cloud platform doprax.com

copyright © 2015-2023