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Simulations with Exact Means and Covariances
Attilio Meucci Bloomberg ALPHA, Portfolio Analytics and Risk June 7, 2009 Bloomberg Portfolio Research Paper No. 2009-06-FRONTIERS Abstract: We present a simple method to generate scenarios from multivariate elliptical distributions where the sample mean and covariances match the respective population moments. This methodology easily applies to large numbers of scenarios and large-dimensional distributions. We show an application to the risk management of a book of options.
Keywords: matrix Riccati equation, antithetic variables, affine equivariance, affine transformations, copula-marginal factorization, correlation stress-testing JEL Classifications: C1, G11 Working Paper SeriesDate posted: June 08, 2009 ; Last revised: August 28, 2009Suggested CitationContact Information
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