Abstract
This section provides some theoretical results about linear least-squares estimation. The study of linear regression is facilitated by the use of matrices.
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Notes
- 1.
Even this work can sometimes be avoided, since some nonlinear regression software has many standard models already programmed.
- 2.
A bond dealer buys bonds at the bid price and sells them at the ask price, which is slightly higher than the bid price. The difference is called the bid–ask spread and covers the trader’s administrative costs and profit.
- 3.
Jarrow(2002, p. 15).
- 4.
A Taylor series linearization of the function h about the point x is \(h(y) \approx h(x) + h^{(1)}(x)(y - x)\), where h (1) is the first derivative of h. See any calculus textbook for further discussion of Taylor series.
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Ruppert, D., Matteson, D.S. (2015). Regression: Advanced Topics. In: Statistics and Data Analysis for Financial Engineering. Springer Texts in Statistics. Springer, New York, NY. https://doi.org/10.1007/978-1-4939-2614-5_11
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