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.
Positivity – Springer Journals
Published: May 1, 2012
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