Simulations with Exact Means and Covariances
8 Pages Posted: 8 Jun 2009 Last revised: 11 Oct 2010
Date Written: June 7, 2009
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 Classification: C1, G11
Suggested Citation: Suggested Citation