Correlation Matrix Shrinkage

v1.0.0

Compute an asset correlation matrix as a convex linear combination of an asset correlation matrix and a target correlation matrix, the target correlation matrix being either:

An equicorrelation matrix made of 1
An equicorrelation matrix made of 0
An equicorrelation matrix made of -1/(n-1), with n the number of assets
A provided correlation matrix

References

Input

{
  "type": "object"
}

Output

{
  "type": "object",
  "required": [
    "assetsCorrelationMatrix"
  ],
  "properties": {
    "assetsCorrelationMatrix": {
      "type": "array",
      "description": "assetsCorrelationMatrix[i][j] is the correlation between the asset i and the asset j",
      "items": {
        "type": "array",
        "items": {
          "type": "number"
        }
      }
    }
  }
}