VarianceGammaDistribution

VarianceGammaDistribution[λ,α,β,μ]

represents a variance‐gamma distribution with location parameter μ, skewness parameter β, and shape parameters λ and α.

Details

  • The probability density for value in a variance‐gamma distribution is proportional to TemplateBox[{{x, -, mu}}, Abs]^(lambda-1/2) exp(beta (x-mu)) TemplateBox[{{lambda, -, {1, /, 2}}, {alpha, , TemplateBox[{{x, -, mu}}, Abs]}}, BesselK].
  • VarianceGammaDistribution allows α and λ to be any positive real numbers, μ any real number, and β a real number such that -α<β<α.
  • VarianceGammaDistribution allows α and β to be any quantities of the same unit dimensions, and μ and λ to be quantities such that α*μ, and λ are dimensionless. »
  • VarianceGammaDistribution can be used with such functions as Mean, CDF, and RandomVariate.

Background & Context

  • VarianceGammaDistribution[λ,α,β,μ] represents a continuous statistical distribution defined and supported on the set of real numbers and parametrized by positive real numbers α and λ (called "shape parameters") and by real numbers μ and β (called a "location parameter" and a "skewness parameter", respectively), , which together determine the overall behavior of its probability density function (PDF). In general, the PDF of a variance-gamma distribution is unimodal with a single "peak" (i.e. a global maximum) at , though its overall shape (its height, its spread, and the horizontal location of its maximum) is determined by the values of λ, α, β, and μ. In addition, the tails of the PDF are "fat", in the sense that the PDF decreases algebraically rather than decreasing exponentially for large values of . (This behavior can be made quantitatively precise by analyzing the SurvivalFunction of the distribution.) The variance-gamma distribution is sometimes referred to as the generalized Laplace distribution and as the Bessel function distribution.
  • The variance-gamma distribution was established in a 1990 paper by Madan and Seneta as a model for stock market returns. Obtained from a normal distribution (NormalDistribution) by mixing on the variance parameter, the variance-gamma distribution satisfies a number of desirable probabilistic properties that make it desirable both for financial applications (as was shown by its founders) and for modeling phenomena outside of finance. In statistics, the variance-gamma distribution is the foundation for the so-called variance-gamma stochastic process, while it has also been used to model various phenomena, including wind turbulence, mortality, and image segmentation.
  • RandomVariate can be used to give one or more machine- or arbitrary-precision (the latter via the WorkingPrecision option) pseudorandom variates from a variance-gamma distribution. Distributed[x,VarianceGammaDistribution[λ,α,β,μ]], written more concisely as xVarianceGammaDistribution[λ,α,β,μ], can be used to assert that a random variable x is distributed according to a variance-gamma distribution. Such an assertion can then be used in functions such as Probability, NProbability, Expectation, and NExpectation.
  • The probability density and cumulative distribution functions for variance-gamma distributions may be given using PDF[VarianceGammaDistribution[λ,α,β,μ],x] and CDF[VarianceGammaDistribution[λ,α,β,μ],x]. The mean, median, variance, raw moments, and central moments may be computed using Mean, Median, Variance, Moment, and CentralMoment, respectively.
  • DistributionFitTest can be used to test if a given dataset is consistent with a variance-gamma distribution, EstimatedDistribution to estimate a parametric variance-gamma distribution from given data, and FindDistributionParameters to fit data to a variance-gamma distribution. ProbabilityPlot can be used to generate a plot of the CDF of given data against the CDF of a symbolic variance-gamma, and QuantilePlot to generate a plot of the quantiles of given data against the quantiles of a symbolic variance-gamma distribution.
  • TransformedDistribution can be used to represent a transformed variance-gamma distribution, CensoredDistribution to represent the distribution of values censored between upper and lower values, and TruncatedDistribution to represent the distribution of values truncated between upper and lower values. CopulaDistribution can be used to build higher-dimensional distributions that contain a variance-gamma distribution, and ProductDistribution can be used to compute a joint distribution with independent component distributions involving variance-gamma distributions.
  • VarianceGammaDistribution is related to a number of other distributions. VarianceGammaDistribution generalizes LaplaceDistribution in the sense that the PDF of VarianceGammaDistribution[1,α,0,μ] is precisely the same as that of LaplaceDistribution[μ,1/α] for . VarianceGammaDistribution can be realized as transformations (TransformedDistribution) of ExponentialDistribution, GammaDistribution, and NormalDistribution and is closely related to HyperbolicDistribution, LogNormalDistribution, BetaDistribution, and PearsonDistribution.

Examples

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Basic Examples  (4)

Probability density function:

Cumulative distribution function:

Mean and variance:

Median is available numerically:

Scope  (8)

Generate a sample of pseudorandom numbers from a variance-gamma distribution:

Compare its histogram to the PDF:

Distribution parameters estimation:

Estimate the distribution parameters from sample data:

Compare a density histogram of the sample with the PDF of the estimated distribution:

Skewness:

Kurtosis:

Limiting value:

Different moments with closed forms as functions of parameters:

Moment:

CentralMoment:

FactorialMoment:

Cumulant:

Closed form for symbolic order:

Hazard function:

Quantile function:

Consistent use of Quantity in parameters yields QuantityDistribution:

Find the spread of the return:

Applications  (1)

Variance gamma distribution can be used to model returns of financial instruments:

Fit the distribution to the data:

Compare the histogram to the PDF:

Find the average return for this period of time:

Find the median return:

Simulate returns for the next 100 trading days:

Properties & Relations  (8)

For same second and third parameters, variance-gamma distribution is closed under addition:

Variance-gamma distribution is closed under translation and scaling by a positive factor:

Relationships to other distributions:

Difference of ExponentialDistribution follows variance-gamma distribution:

Difference of two variables with GammaDistribution follows variance-gamma distribution:

LaplaceDistribution is a special case of variance-gamma distribution:

Variance-gamma distribution is related to GammaDistribution and NormalDistribution:

Rewrite to simplify:

The variance-gamma distribution admits parameter mixture representation:

Check that densities are generically equal:

Neat Examples  (1)

PDFs for different λ values with CDF contours:

Wolfram Research (2012), VarianceGammaDistribution, Wolfram Language function, https://reference.wolfram.com/language/ref/VarianceGammaDistribution.html (updated 2016).

Text

Wolfram Research (2012), VarianceGammaDistribution, Wolfram Language function, https://reference.wolfram.com/language/ref/VarianceGammaDistribution.html (updated 2016).

CMS

Wolfram Language. 2012. "VarianceGammaDistribution." Wolfram Language & System Documentation Center. Wolfram Research. Last Modified 2016. https://reference.wolfram.com/language/ref/VarianceGammaDistribution.html.

APA

Wolfram Language. (2012). VarianceGammaDistribution. Wolfram Language & System Documentation Center. Retrieved from https://reference.wolfram.com/language/ref/VarianceGammaDistribution.html

BibTeX

@misc{reference.wolfram_2024_variancegammadistribution, author="Wolfram Research", title="{VarianceGammaDistribution}", year="2016", howpublished="\url{https://reference.wolfram.com/language/ref/VarianceGammaDistribution.html}", note=[Accessed: 21-November-2024 ]}

BibLaTeX

@online{reference.wolfram_2024_variancegammadistribution, organization={Wolfram Research}, title={VarianceGammaDistribution}, year={2016}, url={https://reference.wolfram.com/language/ref/VarianceGammaDistribution.html}, note=[Accessed: 21-November-2024 ]}