Structure methods for solving the nearest correlation matrix problem |
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| Authors: | Suliman Al-Homidan Munirah AlQarni |
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| Institution: | 1. Department of Mathematics and Statistics, King Fahd University of Petroleum and Minerals, P.O. Box 119, Dhahran, 31261, Saudi Arabia
2. Department of Mathematics, Dammam Girls College, P.O. Box 30903, Al khobar, 31952, Saudi Arabia
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| Abstract: | The nearest correlation matrix problem is to find a positive semidefinite matrix with unit diagonal, that is, nearest in the Frobenius norm to a given symmetric matrix A. This problem arises in the finance industry, where the correlations are between stocks. In this paper, we formulate this problem as a smooth unconstrained minimization problem, for which rapid convergence can be obtained. Other methods are also studied. Comparative numerical results are reported. |
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