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.

 

website: http://www.contingencyanalysis.com
value-at-risk direct link: http://www.value-at-risk.net
copyright © Contingency Analysis, 2003