On Rebonato and Jäckel’s Parametrization Method for Finding Nearest Correlation Matrices∗
نویسنده
چکیده
Portfolio risk forecasts are often made by estimating an asset or factor correlation matrix. However, estimation difficulties or exogenous constraints can lead to correlation matrix candidates that are not positive semidefinite (psd). Therefore, practitioners need to reimpose the psd property with the minimum possible correction. Rebonato and Jäckel (2000) raised this question and proposed an approach; in this paper we improve on that approach by introducing a more geometric perspective on the problem. AMS Subj. Classification: 91B28, 65F30.
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تاریخ انتشار 2008