Generative Probabilistic Forecasting for Market Operations

Keskeiset käsitteet

The author presents a novel generative probabilistic forecasting approach based on the Wiener-Kallianpur innovation representation, demonstrating superior performance in real-time market operations.

Tiivistelmä

The paper introduces a generative probabilistic forecasting method, WIAE-GPF, leveraging weak innovation representation for accurate predictions in dynamic market scenarios. The study compares various forecasting techniques and highlights the effectiveness of nonparametric approaches like WIAE-GPF over parametric models. Results show that WIAE-GPF outperforms other methods in both point and probabilistic forecasting metrics across different market applications. The simplicity and Bayesian sufficiency of the weak innovation representation contribute to the success of WIAE-GPF in capturing volatile market dynamics.

Tilastot

Numerical studies demonstrate superior performance against traditional and machine learning-based techniques.
Hurst Exponent: Real Time - 0.5257, Interchange Spread - 0.5301, ACE - 0.5351
DFA: Real Time - 0.6053, Interchange Spread - 0.6614, ACE - 0.8609

Lainaukset

"WIAE-GPF combines representation learning and Monte-Carlo sampling for accurate forecasts."
"The simplicity of the weak innovation representation contributes to the success of WIAE-GPF."

Tärkeimmät oivallukset

Generative Probabilistic Forecasting with Applications in Market Operations

by Xinyi Wang,L... klo arxiv.org 03-12-2024

https://arxiv.org/pdf/2403.05743.pdf

Syvällisempiä Kysymyksiä

How does the weak innovation representation improve forecasting accuracy compared to traditional methods?

The weak innovation representation improves forecasting accuracy by providing a more robust and flexible framework for capturing the underlying probability distribution of time series data. Traditional parametric methods, such as ARMA models, often make strong assumptions about the form of the underlying distribution, which can lead to model mismatch and reduced accuracy when faced with highly dynamic and volatile data. In contrast, the weak innovation representation allows for nonparametric modeling of time series data without imposing strict constraints on the distribution.
By using an autoencoder structure that extracts innovations from past observations, WIAE-GPF is able to generate future samples conditioned on these innovations. This approach leverages Bayesian sufficiency, ensuring that decision-making based on these forecasts is optimal without loss in performance. Additionally, by constraining the latent process to be IID uniform through Wasserstein GAN learning, WIAE-GPF produces accurate forecasts that match the true conditional distribution of the forecasted variables.

What are the implications of the Hurst Exponent and DFA results on forecasting strategies?

The Hurst Exponent and DFA results provide insights into long-range dependency within time series data. A deviation from 0.5 in these metrics indicates persistence or anti-persistence in temporal patterns beyond short-term fluctuations. In this study's context of electricity price forecasting and ACE prediction for market operations, a slight deviation from 0.5 suggests minimal long-term effects or trends in real-time market signals.
For forecasting strategies, understanding these metrics can help determine whether historical patterns will persist or revert over time intervals relevant to decision-making processes. In scenarios where there is low long-range dependency (Hurst exponent close to 0.5), simpler forecasting models may suffice due to limited predictability beyond short-term fluctuations.

How can the findings of this study be applied to other dynamic market scenarios beyond electricity pricing?

The findings of this study have broader implications for dynamic market scenarios beyond electricity pricing:

Modeling Volatility: The use of weak innovation representations and generative probabilistic forecasting techniques like WIAE-GPF can enhance accuracy in predicting highly volatile markets such as cryptocurrency exchanges or commodity trading platforms.

Risk Management: By accurately capturing conditional distributions through Monte Carlo sampling techniques based on past observations, similar approaches could be applied in financial markets for risk management strategies.

Supply Chain Forecasting: Applying nonparametric GPF methods could improve demand forecasting accuracy in supply chain management by considering uncertainties inherent in complex supply chain networks.

4Healthcare Demand Prediction: Utilizing innovative probabilistic forecasting techniques could aid healthcare systems in predicting patient demand accurately under varying conditions.
Overall, leveraging advanced probabilistic modeling approaches inspired by weak innovation representations can enhance predictive capabilities across diverse dynamic market scenarios requiring accurate forecasts under uncertainty and volatility levels similar to those seen in electricity pricing dynamics studied here.