Complete the Correlation Matrix

C. Kahl () and M. Günther ()
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C. Kahl: ABN AMRO, Quantitative Analytics Group
M. Günther: Bergische Universität Wuppertal, Fachbereich Mathematik und Naturwissenschaften, Fachgruppe Mathematik und Informatik, Lehrstuhl für Angewandte Mathematik / Numerische Analysis

A chapter in From Nano to Space, 2008, pp 229-244 from Springer

Abstract: Abstract In this article we discuss a method to complete the correlation matrix in a multi-dimensional stochastic volatility model. We concentrate on the construction of a positive definite correlation matrix. Furthermore we present a numerical integration scheme for this system of stochastic differential equations which improves the approximation quality of the standard Euler-Maruyama method with minimal additional computational effort.

Keywords: Correlation Matrix; Stochastic Volatility; Implied Volatility; Gaussian Elimination; Chordal Graph (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-74238-8_17

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DOI: 10.1007/978-3-540-74238-8_17

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