Value-at-Risk Theory and Practice
The first advanced book on value-at-risk
Chapter 3, Page 122 Exercise 18
True or false:
a. A covariance matrix is singular if and only if it is positive definite.
b. A covariance matrix is nonsingular if and only if it is positive semidefinite.
c. Every random vector has a positive semidefinite covariance matrix.
Solution
a. False: A positive definite covariance matrix is never singular.
b. False: A positive semi-definite covariance matrix may be singular.
c. False: If second moments for a random vector don't exist, it won't even have a covariance matrix.
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