SODA

Evaluating the CDF for m weighted sums of n correlated lognormal random variables

Rasmusson, Lars (2002) Evaluating the CDF for m weighted sums of n correlated lognormal random variables. [SICS Report]

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Abstract

We show that one can evaluate the cumulative probability density function m weighted sums of n correlated lognormal variables with Monte Carlo simulation rapidly, by deriving its joint probability density function. The adaptive Monte Carlo method allows us to estimate the number of rounds required to achieve a given tolerance. The need for evaluating this function rapidly occurs in many applications, for instance for pricing combinatorial options for bandwidth markets.

Item Type:SICS Report
Uncontrolled Keywords:Lognormal Distribution, Multi-variate Random Variables, Monte Carlo Simulation
ID Code:2253
Deposited By:Vicki Carleson
Deposited On:29 Oct 2007
Last Modified:18 Nov 2009 16:03

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