The nearest correlation matrix problem: Solution by differential evolution method of global optimization

Correlation matrices have many applications, particularly in marketing and financial economics - such as in risk management, option pricing and to forecast demand for a group of products in order to realize savings by properly managing inventories, etc. Various methods have been proposed by different authors to solve the nearest correlation matrix problem by majorization, hypersphere decomposition, semi-definite programming, or geometric programming, etc. In this paper we propose to obtain the nearest valid correlation matrix by the differential evaluation method of global optimization. We may draw some conclusions from the exercise in this paper. First, the ‘nearest correlation matrix problem may be solved satisfactorily by the evolutionary algorithm like the differential evolution method/Particle Swarm Optimizer. Other methods such as the Particle Swarm method also may be used. Secondly, these methods are easily amenable to choice of the norm to minimize. Absolute, Frobenius or Chebyshev norm may easily be used. Thirdly, the ‘complete the correlation matrix problem’ can be solved (in a limited sense) by these methods. Fourthly, one may easily opt for weighted norm or un-weighted norm minimization. Fifthly, minimization of absolute norm to obtain nearest correlation matrices appears to give better results. In solving the nearest correlation matrix problem the resulting valid correlation matrices are often near-singular and thus they are on the borderline of semi-negativity. One finds difficulty in rounding off their elements even at 6th or 7th places after decimal, without running the risk of making the rounded off matrix negative definite. Such matrices are, therefore, difficult to handle. It is possible to obtain more robust positive definite valid correlation matrices by constraining the determinant (the product of eigenvalues) of the resulting correlation matrix to take on a value significantly larger than zero. But this can be done only at the cost of a compromise on the criterion of ‘nearness.’ The method proposed by us does it very well

The nearest correlation matrix problem: Solution by differential evolution method of global optimization

Correlation matrices have many applications, particularly in marketing and financial economics - such as in risk management, option pricing and to forecast demand for a group of products in order to realize savings by properly managing inventories, etc. Various methods have been proposed by different authors to solve the nearest correlation matrix problem by majorization, hypersphere decomposition, semi-definite programming, or geometric programming, etc. In this paper we propose to obtain the nearest valid correlation matrix by the differential evaluation method of global optimization. We may draw some conclusions from the exercise in this paper. First, the ‘nearest correlation matrix problem may be solved satisfactorily by the evolutionary algorithm like the differential evolution method/Particle Swarm Optimizer. Other methods such as the Particle Swarm method also may be used. Secondly, these methods are easily amenable to choice of the norm to minimize. Absolute, Frobenius or Chebyshev norm may easily be used. Thirdly, the ‘complete the correlation matrix problem’ can be solved (in a limited sense) by these methods. Fourthly, one may easily opt for weighted norm or un-weighted norm minimization. Fifthly, minimization of absolute norm to obtain nearest correlation matrices appears to give better results. In solving the nearest correlation matrix problem the resulting valid correlation matrices are often near-singular and thus they are on the borderline of non-semi-positive-definiteness. One finds difficulty in rounding off their elements even at 6th or 7th places after decimal, without running the risk of making the rounded off matrix non-positive definite. Such matrices are, therefore, difficult to handle. It is possible to obtain more robust positive definite valid correlation matrices by constraining the determinant (the product of eigenvalues) of the resulting correlation matrix to take on a value significantly larger than zero. But this can be done only at the cost of a compromise on the criterion of ‘nearness.’ The method proposed by us does it very well

The nearest correlation matrix problem: Solution by differential evolution method of global optimization

Correlation matrices have many applications, particularly in marketing and financial economics - such as in risk management, option pricing and to forecast demand for a group of products in order to realize savings by properly managing inventories, etc. Various methods have been proposed by different authors to solve the nearest correlation matrix problem by majorization, hypersphere decomposition, semi-definite programming, or geometric programming, etc. In this paper we propose to obtain the nearest valid correlation matrix by the differential evaluation method of global optimization. We may draw some conclusions from the exercise in this paper. First, the ‘nearest correlation matrix problem may be solved satisfactorily by the evolutionary algorithm like the differential evolution method/Particle Swarm Optimizer. Other methods such as the Particle Swarm method also may be used. Secondly, these methods are easily amenable to choice of the norm to minimize. Absolute, Frobenius or Chebyshev norm may easily be used. Thirdly, the ‘complete the correlation matrix problem’ can be solved (in a limited sense) by these methods. Fourthly, one may easily opt for weighted norm or un-weighted norm minimization. Fifthly, minimization of absolute norm to obtain nearest correlation matrices appears to give better results. In solving the nearest correlation matrix problem the resulting valid correlation matrices are often near-singular and thus they are on the borderline of semi-negativity. One finds difficulty in rounding off their elements even at 6th or 7th places after decimal, without running the risk of making the rounded off matrix negative definite. Such matrices are, therefore, difficult to handle. It is possible to obtain more robust positive definite valid correlation matrices by constraining the determinant (the product of eigenvalues) of the resulting correlation matrix to take on a value significantly larger than zero. But this can be done only at the cost of a compromise on the criterion of ‘nearness.’ The method proposed by us does it very well

Completing correlation matrices of arbitrary order by differential evolution method of global optimization: A Fortran program

Correlation matrices have many applications, particularly in marketing and financial economics. The need to forecast demand for a group of products in order to realize savings by properly managing inventories requires the use of correlation matrices. In many cases, due to paucity of data/information or dynamic nature of the problem at hand, it is not possible to obtain a complete correlation matrix. Some elements of the matrix are unknown. Several methods exist that obtain valid complete correlation matrices from incomplete correlation matrices. In view of non-unique solutions admissible to the problem of completing the correlation matrix, some authors have suggested numerical methods that provide ranges to different unknown elements. However, they are limited to very small matrices up to order 4. Our objective in this paper is to suggest a method (and provide a Fortran program) that completes a given incomplete correlation matrix of an arbitrary order. The method proposed here has an advantage over other algorithms due to its ability to present a scenario of valid correlation matrices that might be obtained from a given incomplete matrix of an arbitrary order. The analyst may choose some particular matrices, most suitable to his purpose, from among those output matrices. Further, unlike other methods, it has no restriction on the distribution of holes over the entire matrix, nor the analyst has to interactively feed elements of the matrix sequentially, which might be quite inconvenient for larger matrices. It is flexible and by merely choosing larger population size one might obtain a more exhaustive scenario of valid matrices

Improving project management planning and control in service operations environment.

Projects have evidently become the core activity in most companies and organisations where they are investing significant amount of resources in different types of projects as building new services, process improvement, etc. This research has focused on service sector in attempt to improve project management planning and control activities. The research is concerned with improving the planning and control of software development projects. Existing software development models are analysed and their best practices identified and these have been used to build the proposed model in this research. The research extended the existing planning and control approaches by considering uncertainty in customer requirements, resource flexibility and risks level variability. In considering these issues, the research has adopted lean principles for planning and control software development projects. A novel approach introduced within this research through the integration of simulation modelling techniques with Taguchi analysis to investigate ‗what if‘ project scenarios. Such scenarios reflect the different combinations of the factors affecting project completion time and deliverables. In addition, the research has adopted the concept of Quality Function Deployment (QFD) to develop an automated Operations Project Management Deployment (OPMD) model. The model acts as an iterative manner uses ‗what if‘ scenario performance outputs to identify constraints that may affect the completion of a certain task or phase. Any changes made during the project phases will then automatically update the performance metrics for each software development phases. In addition, optimisation routines have been developed that can be used to provide management response and to react to the different levels of uncertainty. Therefore, this research has looked at providing a comprehensive and visual overview of important project tasks i.e. progress, scheduled work, different resources, deliverables and completion that will make it easier for project members to communicate with each other to reach consensus on goals, status and required changes. Risk is important aspect that has been included in the model as well to avoid failure. The research emphasised on customer involvement, top management involvement as well as team members to be among the operational factors that escalate variability levels 3 and effect project completion time and deliverables. Therefore, commitment from everyone can improve chances of success. Although the role of different project management techniques to implement projects successfully has been widely established in areas such as the planning and control of time, cost and quality; still, the distinction between the project and project management is less than precise and a little was done in investigating different levels of uncertainty and risk levels that may occur during different project phase.United Arab Emirates Governmen