PSU Mark
Eberly College of Science Mathematics Department

Meeting Details

For more information about this meeting, contact Kris Jenssen, Yuxi Zheng.

Title:Random Matrix Theory and Covariance Estimation (NOTE: this will be an extended lunch seminar of 45 minutes.)
Seminar:CCMA Luncheon Seminar
Speaker:Jim Gatheral, New York University and Merrill Lynch
Abstract:
Sophisticated optimal liquidation portfolio algorithms that balance risk against impact cost involve inverting the covariance matrix. Eigenvalues of the covariance matrix that are small (or even zero) correspond to portfolios of stocks that have nonzero returns but extremely low or vanishing risk; such portfolios are invariably related to estimation errors resulting from insufficient data. One of the approaches used to eliminate the problem of small eigenvalues in the estimated covariance matrix is the so-called random matrix technique. In this talk I will discuss the basis of random matrix theory, how to apply RMT to the estimation of covariance matrices and whether the resulting covariance matrix performs better than (for example) the Barra covariance matrix.

Room Reservation Information

Room Number:MB114
Date:10 / 23 / 2009
Time:12:00pm - 01:30pm