2017
DOI: 10.2139/ssrn.3054171
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Explicit Solutions to Correlation Matrix Completion Problems, with an Application to Risk Management and Insurance

Abstract: We derive explicit solutions to the problem of completing a partially specified correlation matrix. Our results apply to several block structures for the unspecified entries that arise in insurance and risk management, where an insurance company with many lines of business is required to satisfy certain capital requirements but may have incomplete knowledge of the underlying correlation matrix. Among the many possible completions we focus on the one with maximal determinant. This has attractive properties and … Show more

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Cited by 2 publications
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“…Alternatively, an elementary proof based on Gaussian elimination, using the property that Σ −1 will contain zeros in the positions of the unspecified entries in , is given in [ 18 ]. ▪…”
Section: Maximal Determinant Completionsmentioning
confidence: 99%
“…Alternatively, an elementary proof based on Gaussian elimination, using the property that Σ −1 will contain zeros in the positions of the unspecified entries in , is given in [ 18 ]. ▪…”
Section: Maximal Determinant Completionsmentioning
confidence: 99%