banding: Banding Opreator on Covariance Matrix

In FinCovRegularization: Covariance Matrix Estimation and Regularization for Finance

Description

Apply banding operator on a covariance matrix with a banding parameter.

Usage

banding(sigma, k = 0)

Arguments

sigma	a p*p covariance matrix
k	banding parameter

Value

a regularized covariance matrix after banding operation

References

"High-Dimensional Covariance Estimation" by Mohsen Pourahmadi

Examples

data(m.excess.c10sp9003)
cov.SAM <- cov(m.excess.c10sp9003)
banding(cov.SAM, 7)

Example output

             ABT          LLY          MRK          PFE           F
ABT 0.0038491441 0.0023584483 0.0025771171 0.0022528743 0.001090666
LLY 0.0023584483 0.0075399355 0.0036842562 0.0036280448 0.001959017
MRK 0.0025771171 0.0036842562 0.0059385731 0.0035123664 0.001431143
PFE 0.0022528743 0.0036280448 0.0035123664 0.0057482756 0.001548756
F   0.0010906662 0.0019590174 0.0014311434 0.0015487563 0.009537283
GM  0.0002863964 0.0004901904 0.0009471089 0.0007377721 0.005569539
BP  0.0006721321 0.0005350105 0.0005859571 0.0012716569 0.001164096
CVX 0.0007062312 0.0002541576 0.0006035656 0.0012321979 0.001333297
RD  0.0000000000 0.0007161430 0.0012783004 0.0017758486 0.001711478
XOM 0.0000000000 0.0000000000 0.0008178455 0.0008565317 0.001143911
SP5 0.0000000000 0.0000000000 0.0000000000 0.0015956130 0.002285463
              GM           BP          CVX          RD          XOM
ABT 0.0002863964 0.0006721321 0.0007062312 0.000000000 0.0000000000
LLY 0.0004901904 0.0005350105 0.0002541576 0.000716143 0.0000000000
MRK 0.0009471089 0.0005859571 0.0006035656 0.001278300 0.0008178455
PFE 0.0007377721 0.0012716569 0.0012321979 0.001775849 0.0008565317
F   0.0055695390 0.0011640963 0.0013332969 0.001711478 0.0011439107
GM  0.0086197209 0.0006430998 0.0009878000 0.001000459 0.0008830270
BP  0.0006430998 0.0039703606 0.0024773996 0.002604273 0.0015333847
CVX 0.0009878000 0.0024773996 0.0031370477 0.002476966 0.0015737838
RD  0.0010004592 0.0026042729 0.0024769658 0.003613893 0.0016849126
XOM 0.0008830270 0.0015333847 0.0015737838 0.001684913 0.0019121502
SP5 0.0019601147 0.0010834797 0.0011307435 0.001501201 0.0009360384
             SP5
ABT 0.0000000000
LLY 0.0000000000
MRK 0.0000000000
PFE 0.0015956130
F   0.0022854631
GM  0.0019601147
BP  0.0010834797
CVX 0.0011307435
RD  0.0015012010
XOM 0.0009360384
SP5 0.0018744301

FinCovRegularization documentation built on May 1, 2019, 8:48 p.m.