double_decay {ffp}

Flexible Probabilities using Partial Information

Description

Match different decay-factors on the covariance matrix.

Usage

double_decay(x, slow, fast)

## Default S3 method:
double_decay(x, slow, fast)

## S3 method for class 'numeric'
double_decay(x, slow, fast)

## S3 method for class 'matrix'
double_decay(x, slow, fast)

## S3 method for class 'ts'
double_decay(x, slow, fast)

## S3 method for class 'xts'
double_decay(x, slow, fast)

## S3 method for class 'tbl'
double_decay(x, slow, fast)

## S3 method for class 'data.frame'
double_decay(x, slow, fast)

Arguments

x

An univariate or a multivariate distribution.

slow

A double with the long half-life (slow decay) for the correlation matrix.

fast

A double with the short-life (high decay) for the volatility.

Value

A numerical vector of class ffp with the new probabilities distribution.

References

De Santis, G., R. Litterman, A. Vesval, and K. Winkelmann, 2003, Covariance matrix estimation, Modern investment management: an equilibrium approach, Wiley.

See Also

kernel_entropy half_life

Examples

  library(ggplot2)

  slow <- 0.0055
  fast <- 0.0166
  ret <- diff(log(EuStockMarkets))

  dd <- double_decay(ret, slow, fast)
  dd

  autoplot(dd) +
    scale_color_viridis_c()