On the generalized low rank approximation of the correlation matrices arising in the asset portfolio

DOI10.1016/J.LAA.2014.07.026MaRDI QIDQ406470zbMATHOpenAlexFDO

Authors Jianchao Bai, Maojun Zhang, Xinjun Zhang, Xuefeng Duan

Publication date 8 September 2014

Published in Linear Algebra and its Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1812.04228

zbMATH Keywords

correlation matrixconjugate gradient algorithmfeasible setasset portfoliogeneralized low rank approximation

Mathematics Subject Classification ID

Numerical methods (including Monte Carlo methods) (91G60) Portfolio theory (91G10) Special matrices (15B99)

Abstract: In this paper, we consider the generalized low rank approximation of the correlation matrices problem which arises in the asset portfolio. We first characterize the feasible set by using the Gramian representation together with a special trigonometric function transform, and then transform the generalized low rank approximation of the correlation matrices problem into an unconstrained optimization problem. Finally, we use the conjugate gradient algorithm with the strong Wolfe line search to solve the unconstrained optimization problem. Numerical examples show that our new method is feasible and effective.

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Cites work

• A Quadratically Convergent Newton Method for Computing the Nearest Correlation Matrix
• A majorization algorithm for constrained correlation matrix approximation
• A projected semismooth Newton method for problems of calibrating least squares covariance matrix
• A sequential semismooth Newton method for the nearest low-rank correlation matrix problem
• Alternative gradient algorithms for computing the nearest correlation matrix
• An application of the nearest correlation matrix on web document classification
• An augmented Lagrangian dual approach for the H-weighted nearest correlation matrix problem
• Analysis of structured low rank approximation as an optimization problem
• Computing the nearest correlation matrix--a problem from finance
• Correlation stress testing for value-at-risk: an unconstrained convex optimization approach
• Efficient rank reduction of correlation matrices
• Modified multiplicative update algorithms for computing the nearest correlation matrix
• Optimal low-rank approximation to a correlation matrix
• Rank reduction of correlation matrices by majorization

Cited in

(8)

• A class of multilevel structured low-rank approximation arising in material processing
• A dual active-set proximal Newton algorithm for sparse approximation of correlation matrices
• Optimal low-rank approximation to a correlation matrix
• On the impact of semidefinite positive correlation measures in portfolio theory
• A novel method for a class of structured low-rank minimizations with equality constraint
• An efficient numerical method for condition number constrained covariance matrix approximation
• Simulating realistic correlation matrices for financial applications: correlation matrices with the Perron–Frobenius property
• A relaxed SCA approach for calibrating low rank correlation matrix problem

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