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Quantitative Finance

Questions tagged [principal-components]

The tag has no usage guidance.

12 questions
info Newest Frequent Votes Active Unanswered
5
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2answers
3k views

Principal Component Analysis of yield curve change

Following pictures are the Principal Component Analysis for the yield curve change from https://www.coursera.org/learn/interest-rate-models/lecture/ZHMM6/principal-...
0
votes
0answers
106 views

PCA and constructing an index

Given a set of correlated securities and their corresponding closing prices, I am looking for a way to construct an index of these securities. When applying PCA to obtain the principal components, ...
1
vote
1answer
696 views

Applications of PCA to yield curve analysis

One of the applications of Principal Component Analysis in Finance is to analyse the shape of the yield curve. But what conclusions can be drawn exactly from performing this exercise? Does it help us ...
0
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1answer
103 views

Low-rank approximation techniques for portfolio optimisation

I am trying to understand how low-rank approximation techniques such as PCA, factor analysis, total least squares, orthogonal regression, etc could be used in portfolio optimisation. Say I have a ...
5
votes
2answers
265 views

Principal components in treasuries: spot vs futures

I'm looking to use first few principal components of the US treasury yields for trading, and have choice of using either the data for treasuries themselves, or for the corresponding futures contracts. ...
0
votes
1answer
206 views

What does continuously payable annuity mean?

I am preparing for F< exam but I am unable to understand the meaning of continuously payable annuity. What does it mean? An example would be great.
1
vote
1answer
75 views

Regression model syntax

I'm following the methodology outlined in Developing High-Frequency Equities Trading Models. On page 27, the author outlines an OLS regression model to obtain beta coefficients. The model is defined ...
0
votes
1answer
40 views

Daily principal payments, accumulated on yearly basis in excel

I am doing something seemingly quite easy: Prinipal calcuation of a loan. I need to calculate daily principal payments and accumulate it on a yearly basis. So my current implementation look like ...
2
votes
1answer
3k views

Principal Component Analysis and Yield Curves

I've been tasked with researching trading strategies relating PCA to trading fixed income futures instruments. Apparently PCA is frequently used in this area. I'm just looking for some references for ...
1
vote
1answer
553 views

How can I use PCA to determine spread ratios for multiple legs?

I would like to generalize Paul Teetor's A Better Hedge Ratio, which uses prcomp() to determine a ratio between two legs. I am hoping to extend this to multiple legs, but am having trouble finding ...
1
vote
1answer
150 views

Inferring signals in absence of sign of principal components (PCA)?

PCA seems to be very popular in dimension reduction applications and for extracting the top PCs which explain the data. One such application in futures is on the term structure to obtain the level, ...
1
vote
2answers
2k views

Partial Least Squares Discriminant Analysis

Could anyone point me to detailed literature about "Partial Least Squares Discriminant Analysis"? Intuition, methodology and examples.. Thanks,