[R] solving non-linear system of equations
HAKAN DEMIRTAS
demirtas at uic.edu
Mon Aug 14 17:30:02 CEST 2006
Didn't get any useful response to the following question. Trying again.
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I can't seem to get computationally stable estimates for the following
system:
Y=a+bX+cX^2+dX^3, where X~N(0,1). (Y is expressed as a linear combination
of the first three powers of a standard normal variable.) Assuming that
E(Y)=0 and Var(Y)=1, one can obtain the following equations after tedious
algebraic calculations:
1) b^2+6bd+2c^2+15d^2=1
2) 2c(b^2+24bd+105d^2+2)=E(Y^3)
3) 24[bd+c^2(1+b^2+28bd)+d^2(12+48bd+141c^2+225d^2)]=E(Y^4)-3
Obviously, a=-c. Suppose that distributional form of Y is given so we know
E(Y^3) and E(Y^4). In other words, we have access to the third and fourth
raw moments. How do we solve for these four coefficients? I reduced the
number of unknowns/equations to two, and subsequently used a grid
approach. It works well when I am close to the center of the support, but
fails at the tails. Any ideas?
Hakan Demirtas
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