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List: r-sig-finance
Subject: Re: [R-SIG-Finance] Singular matrix in DCC fit in package rmgarch | how
From: alexios galanos <alexios () 4dscape ! com>
Date: 2020-04-12 2:43:08
Message-ID: 5dcdfdec-adaa-3584-b073-d595139f1435 () 4dscape ! com
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Hi Peter,
I'm not sure whether switching to generalized inverse will be a sensible
or feasible approach in a DCC situation when p>n. The underlying code
makes use of RcppArmadillo and you could try to switch out inv with pinv...
However, perhaps a more reasonable approach would be to:
1. Use a factor model (e.g. GO-GARCH)
2. Regularization/Shrinkage, but these have not been implemented in
rmgarch, and I haven't looked at the literature recently to see what
approaches and models have been proposed
Best,
Alexios
On 4/9/20 6:06 AM, Peter Ruckdeschel wrote:
> Dear Alexis, dear colleagues,
>
> a student of mine, Patrick Harren (CC), is currently writing his master thesis with me as advisor.
>
> He is to write on portfolio optimization for many assets by means of dynamic elliptical copulas
> using a DCC-GARCH model as implemented in R package rmgarch.
>
> In his code he is stumbling on errors of form
>
> "error: matrix multiplication: problem with matrix inverse; suggest to use solve() instead"
>
> I am not surprised this happens, as he has a p>n situation, i.e. more assets than observations,
> so I would guess this is due to singular matrices which at some point of the code is to be inverted.
>
> Is there any [easy] way to replace the general solver base::solve() by something like MASS::ginv()
> for this purpose, or, if appropriate, would you suggest another regularization, say by some sort of
> shrinkage?
>
> Any suggestions welcome, thank you already,
>
> best regards, Peter Ruckdeschel
>
> --
> %******************************************************************
> % Prof. Dr. Peter Ruckdeschel
> % Institut fuer Mathematik, Fakultaet V - Mathematik und Naturwissenschaften
> % Carl von Ossietzky Universitaet Oldenburg,
> % Postfach 25 03, 26111 Oldenburg
> % Office: Wechloy W1 02-227 Tel: +49 (0)441 798-3240 Fax: +49 (0)441 798-193240
> % peter.ruckdeschel@uni-oldenburg.de
> % http://www.uni-oldenburg.de/peter-ruckdeschel
> %******************************************************************
>
>
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