In this work we apply Independent Component Analysis (ICA) to the identification of the factors driving spot rates curve movements. A comparison between the standard Principal Components Analysis (PCA) approach and ICA is carried out both from a theoretical point of view, critically analyzing the negentropy based approach to ICA, and from an empirical point of view, where the performance of immunization strategies based on PCA and ICA are tested.
Bellini, F., Salinelli, E. (2003). Independent component analysis and immunization: An exploratory study. INTERNATIONAL JOURNAL OF THEORETICAL AND APPLIED FINANCE, 6(7), 721-738.
Independent component analysis and immunization: An exploratory study
BELLINI, FABIO;
2003
Abstract
In this work we apply Independent Component Analysis (ICA) to the identification of the factors driving spot rates curve movements. A comparison between the standard Principal Components Analysis (PCA) approach and ICA is carried out both from a theoretical point of view, critically analyzing the negentropy based approach to ICA, and from an empirical point of view, where the performance of immunization strategies based on PCA and ICA are tested.
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