Risk evaluation with enhaced covariance matrix
Data Analysis, Statistics and Probability
2009-11-13 v3 Computational Physics
Statistical Finance
Abstract
We propose a route for the evaluation of risk based on a transformation of the covariance matrix. The approach uses a `potential' or `objective' function. This allows us to rescale data from different assets (or sources) such that each data set then has similar statistical properties in terms of their probability distributions. The method is tested using historical data from both the New York and Warsaw Stock Exchanges.
Keywords
Cite
@article{arxiv.physics/0612059,
title = {Risk evaluation with enhaced covariance matrix},
author = {Krzysztof Urbanowicz and Peter Richmond and Janusz A. Holyst},
journal= {arXiv preprint arXiv:physics/0612059},
year = {2009}
}
Comments
see urbanowicz.org.pl