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Dynamic Principal Component Analysis of Multivariate Volatility via Fourier Analysis 

Authors: Maria Elvira Mancino a; Roberto Renograve b
Affiliations:   a DIMAD, Universitagrave di Firenze,
b Dipartimento di Economia Politica, Universitagrave di Siena,
DOI: 10.1080/1350486042000255861
Publication Frequency: 6 issues per year
Published in: journal Applied Mathematical Finance, Volume 12, Issue 2 June 2005 , pages 187 - 199
Number of References: 16
Formats available: HTML (English) : PDF (English)
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Abstract

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.
Keywords: Cross-volatilities; Fourier series; dynamic principal component analysis
view references (16)
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