A8 Appendix to Chapter 8

A8.1 Chernoff entropy computations

The display below varies the alternative persistence and conditional volatility jointly. The baseline remains fixed at \({\sf a}_1=.95\) and \({\sf b}_1=1\), while the alternative \({\sf b}_2\) grid starts at \(.80\).

Chernoff dual sensitivity

Baseline: \({\sf a}_1=.95\) and \({\sf b}_1=1\). The sliders vary \({\sf a}_2\) and \({\sf b}_2\).

Alternative \({\sf a}_2\)

0.99

Alternative \({\sf b}_2\)

1.50

Chernoff entropy

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\({\sf a}_{\alpha^*}\)

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\({\sf b}_{\alpha^*}\)

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Interactive Chernoff decay-rate plot for joint sensitivity to a2 and b2.

Orange dot = \(\alpha^*\). Dashed line = optimized value.

The interactive plot requires Chart.js to load in the browser.