Dear All, is there a function in R that would help me convert a covariance matrix built based on arithmetic returns to a covariance matrix from log-returns? As an example of the means and covariance from arithmetic: mu <-c(0.094,0.006,1.337,1.046,0.263) sigma <-matrix(c(0.0037,-0.0001,-0.0370,-0.0136,0.0026,-0.0001,0.0001,0.0008,-0.0015,-0.0011,-0.0370,0.0008,1.0466,0.7208,-0.0455,-0.0136,-0.0015,0.7208,1.1717,0.0346,0.0026,-0.0011,-0.0455,0.0346,0.0348),byrow=TRUE,ncol=5) which I would like to conver to a covariance matrix from a log return. My solution probably should be similar to aprevious post at http://stackoverflow.com/questions/7663690/log-covariance-to-arithmetic-covariance-matrix-function, but the other way around? I would greatly apreciate the help, thanks, Andras [[alternative HTML version deleted]]
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