The correlation-matrix tag has no wiki summary.
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283 views
How to simulate correlated Geometric brownian motion for n assets?
So I'm trying to simulate currency movements for several currencies with a given correlation matrix. I have the initial price, drift and volatility for each of the separate currencies, and I want to ...
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Stress testing covariance
Going one level beyond stressed scenarios, to parameters e.g. for a VaR measure: what are the most common approaches for stressing a covariance/correlation matrix, especially taking portfolio exposure ...
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1answer
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Obtaining a consistent covariance matrix for stochastic volatility processes
What is the condition for underlying stochastic volatility processes to give a consistent covariance matrix?
I read in Hull that in order to have a consistent covariance matrix, volatility parameters ...
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1answer
153 views
Is Optimization ignoring correlation valid?
I have a fairly pedestrian optimization problem: Max sharpe, subject to a x% vol target. I have a set of expected returns, asset vols and a correlation matrix. I am finding that when i set the ...
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3answers
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How to see if a set of asset returns corresponds to a known correlation matrix?
Let's say I have an arbitrary set of $n$ period returns for $k$ assets, and a given $k \times k$ correlation matrix (of asset returns), which is known a priori.
Does it makes sense, or is it even ...
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2answers
514 views
Searching for pairs-trading in sub O(n^2 t) time
Let there be $n$ stock symbols.
Let each stock symbol have exactly $t$ ticks (with all ticks miraculously aligned.)
We are now searching for potential pairs for pair trading.
A brute-force solution ...
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0answers
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Rolling window Kendall's tau against APARCH(1,1) correlation
Assume you want to forecast the correlation matrix of a stocks' basket (say 15 ~ 20 stocks from different sectors); assume you need to forecast at $T$ days because you will use the forecast ouput with ...
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Neglect the positive values in negative interest rates modelling?
The magnitude of the negative interested rate should vary correlated with the increase in fixed assets prices and with cross-currency basis spreads.
Could their volatility / correlation ...
3
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1answer
211 views
Does the correlation amongst stocks rise when stock values decline?
Is there any research on whether the correlations among stocks rise when stock indices decline? Which model could account and test for that effect ? Maybe GARCH-BEKK, or some models using copulas?
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2answers
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Analytical relationship between a covariance matrix and cross-sectional dispersion
Given an expected returns vector and a covariance matrix, one can perform a joint draw and measure the average cross-sectional variation as the standard deviation across returns for a particular joint ...
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1answer
437 views
One dimensional analog of cleansing a correlation matrix via random matrix theory
The general idea of cleansing a correlation matrix via random matrix theory is to compare its eigenvalues to that of a random one to see which parts of it are beyond normal randomness. These are then ...
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How do I adjust a correlation matrix whose elements are generated from different market regimes?
Say I want to calculate a correlation matrix for 50 stocks using 3-year historical daily data. And there are some stocks that were recently listed for one year.
This is not technically challenging ...
