3. Two researchers are asked to estimate an ARMA model for a daily USD/GBPexchange rate return series, denoted xt. Researcher A uses Schwarz's informationcriterion (SBC) for determining the appropriate model order and arrives at anARMA(0,1). Researcher B uses Akaike's information criterion (AIC) whichdeems an ARMA(2,0) to be optimal. The estimated models are:Model by A:Model by B:= 0.38+0.10u-1=0.63+0.17x₁-1-0.09xt-2where ut is an error term. You are given the following data for time until day z (i.e. t= z) x² = 0.31, x=-1=0.02, x-2=-0.16 uz = -0.02, uz-1-0.13, uz-2=0.19.a) Produce forecasts for the next 4 days for x (i.e. for times z + 1, z + 2, z + 3, z + 4)from both models.b) Suppose that the actual values of the series x on days z +1, z +2, z + 3, z + 4turned out to be 0.62, 0.19, -0.32, 0.72, respectively. Determine whichresearcher's model produced the most accurate forecasts using Mean-SquareError (MSE) criterion.

Given the estimated model by Researcher A and Researcher B asModel by A: Model by B:…

Answered: 3. Two researchers are asked to…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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A new warehouse is being designed and a decision concerning the number of loading docks is required. There are two models based on truckarrival assumptions for the use of this warehouse, given that loading a truck requires 1 hour. Using the first model, we assume that the warehouse could be serviced by one of the many thousands of independent truckers who arrive randomly to obtain a load for delivery. It is known that, on average, 1 of these trucks would arrive each hour. For the second model, assume that the company hires a fleet of 10 trucks that are assigned full time to shipments from this warehouse. Under that assumption the trucks would arrive randomly, but the probability of any truck arriving during a given hour is 0.1. Obtain the appropriate probability distribution for each of these assumptions and compare the results.
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A manufacturing firm, Caleb Corp, produces and sells product in its home (US) market, and in a foreign market. There is inherent risk in the revenues collected from the foreign market due to volatility in the exchange rate. Under a benchmark strategy, all of the production takes place in the home country. The resulting expected profits for Caleb Corp are variable, due to variation in the exchange rate. As an approximation, the firm has estimated profits for five possible ranges of the exchange rate, with profit represented as a lottery, L= (.2, 150; .2, 200; .3, 220; .2,250; .1, 270) The probabilities are estimated probabilities for the different ranges. The outcomes in this lottery are the estimated final profit levels (not changes in profit). Now suppose the firm can also buy forward contracts on foreign currency to neutralize the effect of the exchange rate on profits. Assume that these provide complete hedging, but that it involves an additional cost, so that following the…
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A municipal solid-waste site for a city must be located at Site A or Site B. After sorting, some of the solid refuse will be transported to an electric powerplant where it will be used as fuel. Data for the hauling of refuse from each site to the power plant are shown in Table P2-4. If the power plant will pay $8.00 per cubic yard of sorted solid waste delivered to the plant, where should the solid-waste site be located? Use the city’s viewpoint and assume that 200,000 cubic yards of refuse will be hauled to the plant for one year only. One site must be selected.

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