Risk evaluation with enhanced covariance matrix

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.

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Year of publication:	2007
Authors:	Urbanowicz, Krzysztof ; Richmond, Peter ; Hołyst, Janusz A.
Published in:	Physica A: Statistical Mechanics and its Applications. - Elsevier, ISSN 0378-4371. - Vol. 384.2007, 2, p. 468-474
Publisher:	Elsevier
Subject:	Financial risk \| Stochastic processes \| Probability distribution \| Stock market data \| Correlations

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011064134