On minimum correlation in construction of multivariate distributions

Start: 02/07/2013 - 4:15pm
End  : 02/07/2013 - 5:15pm

Statistics/OR/Math Finance Seminar

Nevena Maric (University of Missouri-St. Louis)


In this talk we will present an algorithm for exact generation of bivariate samples with pre-specified marginal distributions and a given correlation, based on a mixture of Fr\'echet-Hoeffding bounds and marginal products. The algorithm can accommodate any among the theoretically possible correlation coefficients, and explicitly provides a connection between simulation and the minimum correlation attainable for different distribution families. We calculate the minimum correlations in several common distributional examples, including in some that have not been looked at before. The method can also be extended to multivariate setting. As an illustration, we provide the details and results of implementing the algorithm for generating three-dimensional negatively and positively correlated Beta random variables, making it the only non-copula algorithm for correlated Beta simulation in dimensions greater than two. Joint work with Vanja Dukic.

CMC, Roberts South 105