matlab line search,Question about "optimset" option LineSearchType

function[quantile, dq] = CAViaROptimisation(y, THETA, C)

% ****************************************************************************************************************************************

% * *

% * Codes for the paper "Measuring Comovements by Regression Quantiles" by Lorenzo Cappiello, *

% * Bruno Gerard and Simone Manganelli *

% * *

% * By SIMONE MANGANELLI, European Central Bank, Frankfurt am Main. *

% * Created on 26 May, 2004. Last modified 13 April 2005. *

% * *

% ****************************************************************************************************************************************

%

%

%************ INPUTS *********************

%

% y = (T,1) time series of returns

% THETA = confidence level of the Value at Risk

% C = Crisis dummy

%

%************ OUTPUT *********************

%

% quantile = (T,1)-vector of estimated quantiles

% dq = vector of quantile derivatives

%

%*****************************************************************************************

% *****************************************************************************************

% Set parameters for optimisation.

% *****************************************************************************************

T = length(y);

%REP = 5; % Number of times the optimization algorithm is repeated.

%nInitialVectors = [1000, 3]; % Number of initial vector fed in the uniform random number generator for AS model.

%nInitialVectors = [1, 5]; % Number of initial vector fed in the uniform random number generator for AS model.

nInitialCond = 5;% Select the number of initial conditions for the optimisation.

MaxFunEvals = 100;% Parameters for the optimisation algorithm. Increase them in case the algorithm does not converge.

MaxIter = 100;

options = optimset('LargeScale','off','HessUpdate','dfp','LineSearchType','quadcubic','MaxFunEvals', MaxFunEvals,...

'display','off','MaxIter', MaxIter,'TolFun', 1e-8,'TolX', 1e-8);

warningoff

% Compute the empirical THETA-quantile for y (the in-sample vector of observations).

%empiricalQuantile = ysort(round(300*THETA));

empiricalQuantile = prctile(y(1:300), THETA*100);

eps = 1e-10;

%

%

%**************************** Optimization Routine ******************************************

initialTargetVectors = [unifrnd(-.1, .1, nInitialCond, 3), unifrnd(.7, .99, nInitialCond, 1), unifrnd(-.1, .1, nInitialCond, 1)];

b=[];

fori = 1:nInitialCond

b0 = initialTargetVectors(i,:)'; b0 = b0; b1 = b0+3*eps;

RQ1 = 1e10;

whilenorm(b1-b0)>eps

b0 = b1;%RQ0 = RQ1;

b1 = fminsearch('CAViaR', b0, [], y, C, THETA, 1);

end

q = CAViaR(b1, y, C, THETA, 0);%q = CAViaR(y, b0, C, .05);

RQ1 = abs(THETA-(y

b = [b;RQ1/100, b1'];

end

b

[aa,a] = min(b(:,1));

b1 = b(a,2:end)';

%************************** Compute variables that enter output *****************************

% Compute VaR and Hit for the estimated parameters of RQ.

quantile = CAViaR(b1, y, C, THETA, 0);

%return

% Compute gradient

dq1 = zeros(T,1); dq2 = dq1; dq3 = dq1; dq4 = dq1; dq5 = dq1; q = dq1;

fori = 3:T

q(i) = b1(1) + b1(2)*C(i) + b1(3)*y(i-1) + b1(4)*q(i-1) - b1(3)*b1(4)*y(i-2) + b1(5)*abs(y(i-1));

dq1(i,1) = 1 + b1(4) * dq1(i-1,1);

dq2(i,1) = C(i) + b1(4) * dq2(i-1,1);

dq3(i,1) = y(i-1) + b1(4) * dq3(i-1,1) - b1(4)*y(i-2);

dq4(i,1) = q(i-1) + b1(4)*dq4(i-1,1) - b1(3)*y(i-2);

dq5(i,1) = abs(y(i-1)) + b1(4) * dq5(i-1,1);

end

dq = [dq1, dq2, dq3, dq4, dq5];