Value-at-Risk Theory and Practice

The first advanced book on value-at-risk

Chapter 2, Page 93
Exercise 21

Use Newton’s method with line searches to solve f(x) = 0, where f : 2 2 is defined as:

[2.165]

Use seed value = (1, 1). Do not use scaling.

Solution

Details of this solution are available as an Excel spreadsheet.

The Jacobian of f is:

[s1]

Based upon this, we apply Newton’s method with line searches. Results are indicated below.

1

(1.0000, 1.0000)

(2.0000, 0.3333)

(1.9619, 0.5525)

(1.7507, 1.0072)

(1.7478, 0.9233)

(1.7476, 0.9148)

(1.7476, 0.9147)

(–1.0000, –4.0000)

(–0.9259, 3.9259)

(–0.6817, 3.2208)

(0.3427, –0.4232)

(0.0288, –0.0368)

(0.0003, –0.0004)

(0.0000, 0.0000)

2
3
4
5
6
7

A line search was used to obtain . Newton’s method originally determined = (1.7515, 1.7636), which failed criterion [2.152]. Applying a line search, yielded * = 0.1533. This corresponded to value x* = (1.9619, 0.5525). We set = x*. This did satisfy criterion [2.152]. No other line searches were required.  

 

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