Dear Javier,
Thank you for your insights on how to setup parametric modulators (from about a month ago). Sorry that my response is delayed. I have a question regarding the setup. I currently have the model setup with 5 COPEs. The first three are all unique events that don't overlap (win, loss and balloon inflation), all with 1s in the last column. The last two COPEs are linear and exponential risk measures (overlapping with inflation). The linear risk runs 1,2,3,4, etc. whereas the exponential is 2,4,8,16.
I have included these in an exploratory way, as the balloon size increase linearly with each pump, but the amount of money at stake increases exponentially. Is it ok to include both COPEs, as long as I have them orthogonalized, or should I only use one? I'm wondering if they would be overlapping in the amount of variance they would account for? It appears that exponential model is the better one, so I may end up going with that.
Thank you for your help!
Ahnate
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