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Cholesky

You can generate correlated random variables easily with a Cholesky (pronounce “koleski”) decomposition. I present a simple example here. For the better Iman Conover approach look here, please.

Helpful links are:
Anton Theunissen: BUS 864 Computing Notes  - Here I got a simple VBA code from (see below my slightly changed version)
Martin Haugh: The Monte Carlo Framework,
                    Examples from Finance and
                    Generating Correlated Random
                    Variables
                              - Nice theory and a Matlab © example
Team Latte: All about the Cholesky Matrix      - Nice explanation and why it's "preferrable" to eigenvalues (I do not necessarily agree)
Michael H. Press: Numerical Recipes               - Use algorithms tred2 and tqli if you need to treat the matter more seriously

20091110_PB_01_Cholesky
20110320_PB_01_Cholesky_Code

If you are interested in downloading a 1.586 MB Excel 2010 sample file go to my Download page, please.

20110320_PB_01_RandCorr_Code
20110320_PB_02_RandCorr_Code
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