[R-SIG-Finance] Singular matrix in DCC fit in package rmgarch | how to bypass base::solve() elegantly

Peter Ruckdeschel peter@ruckde@che| @end|ng |rom web@de
Thu Apr 9 15:06:37 CEST 2020


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

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