Value of information in the binary case and confusion matrix
Belavkin, Roman V. 
ORCID: https://orcid.org/0000-0002-2356-1447, Pardalos, Panos M. and Principe, Jose C.
(2022)
Value of information in the binary case and confusion matrix.
Physical Sciences Forum. Volume 5, Issue 1.
In: The 41st International Workshop on Bayesian Inference and Maximum Entropy Methods in Science and Engineering, 18-22 July 2022, Paris, France.
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[Conference or Workshop Item]
(doi:10.3390/psf2022005008)
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Abstract
The simplest Bayesian system used to illustrate ideas of probability theory is a coin and a boolean utility function. To illustrate ideas of hypothesis testing, estimation or optimal control, one needs to use at least two coins and a confusion matrix accounting for the utilities of four possible outcomes. Here we use such a system to illustrate the main ideas of Stratonovich’s value of information (VoI) theory in the context of a financial time-series forecast. We demonstrate how VoI can provide a theoretical upper bound on the accuracy of the forecasts facilitating the analysis and optimization of models.
| Item Type: | Conference or Workshop Item (Paper) |
|---|---|
| Sustainable Development Goals: | |
| Theme: | |
| Additional Information: | The dataset underpinning the research is available: https://doi.org/10.22023/mdx.21436248.v1 |
| Research Areas: | A. > School of Science and Technology > Computer Science > Artificial Intelligence group |
| Item ID: | 36712 |
| Notes on copyright: | Copyright: © 2022 by the authors. Licensee MDPI, Basel, Switzerland.
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/). |
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| Depositing User: | Roman Belavkin |
| Date Deposited: | 04 Nov 2022 10:23 |
| Last Modified: | 21 Nov 2022 15:57 |
| URI: | https://eprints.mdx.ac.uk/id/eprint/36712 |
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