Advanced Search
MyIDEAS: Login

Completing correlation matrices of arbitrary order by differential evolution method of global optimization: A Fortran program

Contents:

Author Info

  • Mishra, SK

Abstract

Correlation matrices have many applications, particularly in marketing and financial economics. The need to forecast demand for a group of products in order to realize savings by properly managing inventories requires the use of correlation matrices. In many cases, due to paucity of data/information or dynamic nature of the problem at hand, it is not possible to obtain a complete correlation matrix. Some elements of the matrix are unknown. Several methods exist that obtain valid complete correlation matrices from incomplete correlation matrices. In view of non-unique solutions admissible to the problem of completing the correlation matrix, some authors have suggested numerical methods that provide ranges to different unknown elements. However, they are limited to very small matrices up to order 4. Our objective in this paper is to suggest a method (and provide a Fortran program) that completes a given incomplete correlation matrix of an arbitrary order. The method proposed here has an advantage over other algorithms due to its ability to present a scenario of valid correlation matrices that might be obtained from a given incomplete matrix of an arbitrary order. The analyst may choose some particular matrices, most suitable to his purpose, from among those output matrices. Further, unlike other methods, it has no restriction on the distribution of holes over the entire matrix, nor the analyst has to interactively feed elements of the matrix sequentially, which might be quite inconvenient for larger matrices. It is flexible and by merely choosing larger population size one might obtain a more exhaustive scenario of valid matrices.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/2000/
File Function: original version
Download Restriction: no

File URL: http://mpra.ub.uni-muenchen.de/31282/
File Function: revised version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2000.

as in new window
Length:
Date of creation: 05 Mar 2007
Date of revision:
Handle: RePEc:pra:mprapa:2000

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Incomplete; complete; correlation matrix; valid; semi-definite; eigenvalues; Differential Evolution; global optimization; computer program; fortran; financial economics; arbitrary order;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Chesney, Marc & Scott, Louis, 1989. "Pricing European Currency Options: A Comparison of the Modified Black-Scholes Model and a Random Variance Model," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(03), pages 267-284, September.
  2. Ingram Olkin, 1981. "Range restrictions for product-moment correlation matrices," Psychometrika, Springer, vol. 46(4), pages 469-472, December.
  3. Christian Kahl & Peter Jackel, 2006. "Fast strong approximation Monte Carlo schemes for stochastic volatility models," Quantitative Finance, Taylor & Francis Journals, vol. 6(6), pages 513-536.
  4. Raoul Pietersz & Patrick Groenen, 2004. "Rank reduction of correlation matrices by majorization," Quantitative Finance, Taylor & Francis Journals, vol. 4(6), pages 649-662.
  5. Grubisic, I. & Pietersz, R., 2005. "Efficient Rank Reduction of Correlation Matrices," ERIM Report Series Research in Management ERS-2005-009-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  6. Mishra, SK, 2004. "Optimal solution of the nearest correlation matrix problem by minimization of the maximum norm," MPRA Paper 1783, University Library of Munich, Germany.
  7. Mishra, SK, 2006. "Global Optimization by Differential Evolution and Particle Swarm Methods: Evaluation on Some Benchmark Functions," MPRA Paper 1005, University Library of Munich, Germany.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Sudhanshu K Mishra, 2013. "Global Optimization of Some Difficult Benchmark Functions by Host-Parasite Coevolutionary Algorithm," Economics Bulletin, AccessEcon, vol. 33(1), pages 1-18.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:2000. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.