Questions tagged [pca]

Question 1

I was wondering if this approach to computing factor neutral returns with PCA/SVD is sounds. Say we have $R = FB + \epsilon$ where $R$ is returns of some period, $F$ is factor returns, $B$ is factor ...

Question 2

My data is from kaggle. I have volatitliy data of 112 stocks for 3830 time periods. Each time period represents a 20 seconds period. Think of this as a data matrix of 112 samples and 3830 features. I ...

Question 3

When performing principal component analysis (PCA) on the yield curve, I've seen people online using different methods. Either you use the directly the yield of the OTR bonds or you use the difference ...

Question 4

I am working on a project to use PCA for hedging. How can I backtest that the risk obtained with under a MultiVariate Normal model is working well? (PCA for Risk bucketing) Let's say, I have ...

Question 5

I am wondering how would the results of PCA on a volatility surface would be used differently than the SABR parameters. Given the first three components of a PCA are related to level, smile and skew, ...

Question 6

Consider that I have a dataset of 8964 daily observation of US yields from 1990 to May 2024. These yields are related to each maturity from 3 months, every 3 months, to 30 years, for a total of 120 ...

Question 7

Imagine you have a matrix of returns (n assets, t days) and want to compute c statistical risk factors using PCA/SVD, so that you get (n, c) matrix of factor loadings and (c, t) matrix of factor ...

Question 8

In Li and Papanicolaou, Applied Mathematics & Optimization 86, 12 (2022), a key step is the determination of the diffusion matrix $\Sigma_0 = \Psi_0\Psi_0^T$ with $\Psi_0\in \mathbb{R}^{m\times (d+...

Question 9

Been doing loads of reading about PCA, FA and SVD but still fail to understand the fundamentals of how PCA links with factor analysis in the context of risk modelling. Here is where I'm stuck: Given a ...

Question 10

Using PCA I have the below PC1, first component weights, for 4 quarterly expiries of short term interest rate future. These are hypothetical values used to help my question. March: 0.005542604, June: ...

Question 11

I am aware of an abundant literature on Principal Component Analysis (PCA) application for yield curves. All of these papers to me look merely a statistics-oriented results. Most of the papers argue ...

Question 12

I ran into an interesting case recently. I am trying to construct a set of uncorrelated factors for a statistical factor model. I have started with picking a certain amount of assets (indices) which I ...

Question 13

I’ve been working on different interest rate risk transformation methods for swaps and was interested in implementing PCA & OLS regression. I’m looking to bucket my exposure in all tenors to ...

Question 14

For context, I am building an eigenportfolio following the conventions of Avellaneda and Lee Statistical Arbitrage in the U.S. Equities Market (2008), and I get negative weights for eigenportfolios 2,...

Question 15

I saw some threads about reducing dimensionality of IR risk strips, e.g. PCA and risk bucketing. However, I did not find a satisfying answer to that yet. Therefore, I decided to formulate a similar ...

Stack Exchange Network

Questions tagged [pca]

Is this a correct approach to computing residual returns with PCA Factors?

Clustering stocks using PCA & kernelPCA

PCA on the yield curve and extremely autocorrelated yields

PCA Backtesting for Hedging

Volatility surface PCA and SABR explanation gap

PCA on yield curve - Matlab

Computing statistical risk factors with SVD/PCA - do you center daily returns?

How to estimate the diffusion matrix $\Sigma_0$ in Li and Papanicolaou, Applied Mathematics & Optimization (2022)?

PCA risk modelling

Price display of weighted spreads via PCA and value changed

Does PCA for yield curve has any tangible value?

PCA factors not uncorrelated

PCA and OLS regression to transform to interest rate risk? [duplicate]

When you have negative weights in the context of portfolio construction, what is the correct way normalize them?

Dimension reduction of par risk strips

Hot Network Questions