Desmooth_AR1
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Function Description
Returns an array corresponding to the AR(1) desmoothed (or
‘decorrelated) values of a series, as described in the book Extreme Events. This
involves:
(a)
Postulating (for, say, a return series) that there is some underlying
‘true’ return series, , and that the observed series, , derives from it via a first
order autoregressive model, ;
(b)
Identifying the value of (between 0 and 0.5)
for which has zero first order
correlation (which implies that the covariance between and is zero; and
(c)
Using this value of deriving using the following formula:
The value of in (b) can be
accessed using MnDesmooth_AR1_rho.
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