Optimal f and analytical probability distributions

["rudolf stricker" <rst@xxxxxxxxxxx>]

Having a closer look at the Optimal f procedure (as posted here by Ed
Winters) I have some doubts, if this simple "integration process"
along the historical trades will lead to sufficient accuracy in terms
of probability, when it comes to "tailed" distributions (e.g. for
short positions in options). At least for the system tests I did, the
number of points in the tail was far to low to get sufficient accuracy
for this "rectangular" integration process.

So my question is:
Will the accuracy of the probability really increase, if I use an
analytical probability distribution as an approximation for the
discrete trading events?
And if so: What type of probability distribution is most appropriate?
Should I use e.g. Weibull's distribution? - Or any suggestions?

BTW: Increased accuracy of the "tail-losses" (e.g. probability xx of
loosing more than yy%) imo could be very helpful as an additional
criterion in system optimization.

mfg rudolf stricker
| Disclaimer: The views of this user are strictly his own.