E
Edwin
Member
Two questions;-
1) In the Acted course notes one of the advantages of MC Simulation is stated to be that;-
What I don't understand is;- does Cholesky Decomposition use the correlation matrix between the simulated distributions or does one have to take the pain and calculate correlation from past data?
Given the fact that the correlation matrix from observed values is more accurate, then is the point above that says "it is possible to simulate the interdependence of risks" really an advantage if we don't use the simulated interdependencies?
Help will be appreciated.
1) In the Acted course notes one of the advantages of MC Simulation is stated to be that;-
"it is possible to simulate the interdependence of risks"
What I don't understand is;- does Cholesky Decomposition use the correlation matrix between the simulated distributions or does one have to take the pain and calculate correlation from past data?
Given the fact that the correlation matrix from observed values is more accurate, then is the point above that says "it is possible to simulate the interdependence of risks" really an advantage if we don't use the simulated interdependencies?
Help will be appreciated.