Connections between Entropic and Linear Projections in Asset Pricing Estimation

  title={Connections between Entropic and Linear Projections in Asset Pricing Estimation},
  author={Michael J. Stutzer and Y. Kitamura},
  journal={Econometrics eJournal},
  • Michael J. Stutzer, Y. Kitamura
  • Published 2002
  • Economics
  • Econometrics eJournal
  • The concept of entropy has a long and distinguished history in the physical sciences and engineering, in fields ranging from thermodynamics to image processing. Each of these applications employs a probability distribution that solves a relative entropy projection problem, i.e. an optimization problem with an entropy objective, subject to linear (e.g. moment) constraints. This paper develops the relationship between relative entropy projection approaches and the better-known linear projection… CONTINUE READING
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