Geometric Deep Learning for Realized Covariance Matrix Forecasting

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Tác giả: Andrea Bucci, Michele Palma, Chao Zhang

Ngôn ngữ: eng

Ký hiệu phân loại: 512.5 Linear algebra

Thông tin xuất bản: 2024

Mô tả vật lý:

Bộ sưu tập: Metadata

ID: 205327

Traditional methods employed in matrix volatility forecasting often overlook the inherent Riemannian manifold structure of symmetric positive definite matrices, treating them as elements of Euclidean space, which can lead to suboptimal predictive performance. Moreover, they often struggle to handle high-dimensional matrices. In this paper, we propose a novel approach for forecasting realized covariance matrices of asset returns using a Riemannian-geometry-aware deep learning framework. In this way, we account for the geometric properties of the covariance matrices, including possible non-linear dynamics and efficient handling of high-dimensionality. Moreover, building upon a Fr\'echet sample mean of realized covariance matrices, we are able to extend the HAR model to the matrix-variate. We demonstrate the efficacy of our approach using daily realized covariance matrices for the 50 most capitalized companies in the S&P 500 index, showing that our method outperforms traditional approaches in terms of predictive accuracy.
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