Practitioners often have to compute a correlation matrix for financial applications as in value-at-risk, asset … allocation, and option pricing, etc. The computed correlation matrix, however, could be a non-positive semidefinite matrix due to … invalid correlation matrix to be fixed. Algorithm 1 keeps the top left submatrix unchanged, whereas Algorithm 2, under a …

ensemble of random matrices that models the truly existing set of measured correlation matrices. As a most welcome side effect …

model for random correlation matrices to model non-stationary effects. We then use the Merton model in which default events … ensemble of random matrices that models the truly existing set of measured correlation matrices. As a most welcome side effect …

sampling error in the asset covariance matrix leads to systematic biases in the volatility and correlation forecasts of these …