merton.portfolio.correlation

Asset-correlation helpers.

Functions

basel_irb_correlation(→ merton._typing.FloatArray)	Re-export of merton.portfolio.vasicek_factor.basel_irb_correlation().
asset_correlation_from_equity(→ merton._typing.FloatArray)	Asset-correlation matrix estimated from a panel of equity log-returns.

Module Contents

merton.portfolio.correlation.basel_irb_correlation(pd: merton._typing.ArrayLike, *, asset_class: str = 'corporate') → merton._typing.FloatArray

Re-export of merton.portfolio.vasicek_factor.basel_irb_correlation().

merton.portfolio.correlation.asset_correlation_from_equity(returns: merton._typing.ArrayLike, *, leverage: merton._typing.ArrayLike | None = None, shrinkage: float = 0.0) → merton._typing.FloatArray

Asset-correlation matrix estimated from a panel of equity log-returns.

Parameters:

• returns – 2-D array of shape (n_obs, n_firms) containing equity log-returns.

• leverage – Optional 1-D array of length n_firms of equity/(equity+debt) ratios. When supplied, equity correlations are scaled by the leverage product to approximate the asset-return correlation matrix.

• shrinkage – Linear-shrinkage parameter in [0, 1]. 0 returns the sample correlation; 1 returns the identity (no correlation).