Re: Generating pairwise correlated GBM data
Posted by
Luigi Ballabio on
Feb 19, 2016; 1:51pm
URL: http://quantlib.414.s1.nabble.com/Generating-pairwise-correlated-GBM-data-tp17308p17310.html
Hello,
you can use the StochasticProcessArray to take a number of 1-D processes and their correlation matrix and build the corresponding multi-dimensional process, that can then be passed to the MultiPathGenerator class to generate the prices.
By default, the StochasticProcessArray class fixes a defective correlation matrix using the spectral salvaging algorithm. You can lookup the pseudoSqrt function in QuantLib to see its implementation. The function can use a few other algorithms, but at this time you can't choose them when you instantiate StochasticProcessArray.
You can look at QuantLib/test-suite/pathgenerator.cpp for examples.
Hope this helps,
Luigi
Hi,
1) Is it possible to generate correlated price data in quantlib
by using a correlation matrix? (needed for simulations)
2) Sometimes there can be a problem with the correlation matrix,
especially if it is not positive definite, ie. a defective correlation matrix.
Here's an example for a defective correlation matrix:
(
http://blogs.sas.com/content/iml/2012/09/12/when-is-a-correlation-matrix-not-a-correlation-matrix.html
)
1.0 0.6 0.9
0.6 1.0 0.9
0.9 0.9 1.0
In such cases one has to find a replacement matrix (Nearest Correlation Matrix
Problem).
Anybody know of C/C++/C#/Java code or library for computing/finding the
nearest correlation matrix?
--
Thx
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