Dynamic Principal Component Analysis of Multivariate Volatility via Fourier Analysis
A method is proposed to compute a time-varying correlation matrix between asset prices. The method has a natural geometric interpretation in terms of dynamic principal components analysis. The paper illustrates, via Monte Carlo experiments and data analysis, the potential of the method in computing cross-correlations; and it describes market integration, introducing the concept of reference asset.
Volume (Year): 12 (2005)
Issue (Month): 2 ()
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