Generating daily changes in market variables using a multivariate mixture of normal distributions

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Generating daily changes in market variables using a multivariate mixture of normal distributions

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Winter Simulation Conference archive
Proceedings of the 33nd conference on Winter simulation table of contents

Arlington, Virginia

SESSION: Analysis methodology table of contents

Pages: 283 - 289

Year of Publication: 2001

ISBN:0-7803-7309-X

Author

Jin Wang

Valdosta State University, Valdosta, Georgia

Sponsors

INFORMS/CS : Institute for Operations Research and the Management Sciences/College on Simulation
IEEE/SMCS : Institute of Electrical and Electronics Engineers/Systems, Man, and Cybernetics Society
NIST : National Institute of Standards and Technology
ACM: Association for Computing Machinery
SCS : The Society for Computer Simulation International
SIGSIM: ACM Special Interest Group on Simulation and Modeling
IIE : Institute of Industrial Engineers
IEEE/CS : Institute of Electrical and Electronics Engineers/Computer Society
ASA : American Statistical Association

Publisher

IEEE Computer Society Washington, DC, USA

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Downloads (6 Weeks): 4, Downloads (12 Months): 37, Citation Count: 1

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ABSTRACT

The mixture of normal distributions provides a useful extension of the normal distribution for modeling of daily changes in market variables with fatter-than-normal tails and skewness. An efficient analytical Monte Carlo method is proposed for generating daily changes using a multivariate mixture of normal distributions with arbitrary covariance matrix. The main purpose of this method is to transform (linearly) a multivariate normal with an input covariance matrix into the desired multivariate mixture of normal distributions. This input covariance matrix can be derived analytically. Any linear combination of mixtures of normal distributions can be shown to be a mixture of normal distributions.

REFERENCES

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