This is the third paper in a series devoted to obtaining noise-reduced, stable correlations by smoothing time series using Singular Spectrum Analysis, or SSA. Here we show that the SSA-based correlations are superior in terms of noise reduction, employing a number of simple tests using Random...

We introduce a methodology from geophysics, Singular Spectrum Analysis (SSA), to obtain stable, noise-cleaned correlations for long term risk (e.g. counterparty risk). SSA is applied to time series to smooth them in a robust manner. The SSA-smoothed time series are then used to obtain the...

We summarize new results for estimating correlations for use in risk management. These estimates have better behavior than traditional estimation approaches from both a business standpoint and a technical standpoint. We smooth time series using Singular Spectrum Analysis (SSA) and compute...