MCNORM

Simulate a matrix of multivariate normal returns using Monte-Carlo with the option to preserve an expected correlation structure.

Description

Simulate a matrix of returns using multi-variate Monte-Carlo.

Syntax

The following describes the function signature for use in Microsoft Excel's formula bar.

=MCNORM(mu, sigma, rho, isRhoExact, T, dataPeriodicity)

Input(s)

Argument	Description
mu	Required. Vector of expected returns.
sigma	Required. Vector of expected risk.
rho	Optional. Correlation matrix. If not specified, the function assumes zero correlation coefficients (identity matrix).
isRhoExact	Optional. Logical (TRUE or FALSE). If TRUE, the sample mean and covariances will match mu and sigma. The resulting compounded (terminal) prices will be in close agreement, set to FALSE for typical expected value behavior. If the argument is not specified, the function defaults to FALSE.
T	Optional. Time horizon (number of observations, in years) to generate. If not specified, defaults to 1.
dataPeriodicity	Optional. Periodicity of the data, used for annualization. If you do not enter the argument, it defaults to 1. e.g. Daily = 255, Monthly = 12, Yearly = 1, Quarterly = 4.

Output(s)

Matrix of multi-variate returns simulated using Monte-Carlo.

Example

89KB

MCNORM.xlsx

Open

Example Workbook: MCNORM