Describe two methods for generating prediction intervals
This tests your grasp of uncertainty quantification. A great answer contrasts an analytical method (assuming normal errors, using multipliers like 1.96 for 95%) with a simulation method (bootstrapping residuals).
This tests your grasp of uncertainty quantification and method trade-offs. A strong answer first details the analytical method: assume normal errors and apply a multiplier (e.g., 1.96 for 95%) to the forecast's standard deviation. Then, contrast this with bootstrapping, which simulates future paths by resampling residuals, avoiding normality assumptions. The key red flag is confusing prediction intervals (for a future value) with confidence intervals (for a parameter).
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- #forecasting
- #statistics
- #uncertainty
- #modeling
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