Download This PaperMoment Matching for the Masses
36 Pages Posted: 4 Aug 2006
Date Written: August 2006
Abstract
It is well known that Cholesky decomposition will compress the tails in a multivariate probability mass. With significantly skewed or highly kurtotic distributions, this tail compression can be quite severe. In this paper, a simple methodology is presented to generate multivariate systems matching the first four moments, a desired correlation structure, and any number of tail points.
Keywords: Value at Risk, Simulation, Cholesky decomposition, Risk Management
JEL Classification: C15, E47, G11, G12
Suggested Citation: Suggested Citation
White, Derek and Okunev, John, Moment Matching for the Masses (August 2006). Available at SSRN: https://ssrn.com/abstract=921451 or http://dx.doi.org/10.2139/ssrn.921451
Derek White (Contact Author)
UNSW Australia Business School, School of Banking and Finance ( email )
Sydney, NSW 2052
Australia
+61 2 9385 5850 (Phone)
+61 2 9385 6347 (Fax)
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