Forums  > Pricing & Modelling  > Simulation of correlated assets with 3 factors forward curve model  
     
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s654351


Total Posts: 2
Joined: Aug 2019
 
Posted: 2020-02-06 15:34
Hello,

I work in energy.
Assuming I use a HJM type of forward curve model with 3 factors for each underlying.
I have 3 underlyings.
How do you simulate for a Monte Carlo valuation the 3 underlying price processes that are correlated as per a given correlation matrix?
I only know the simple case for 2 underlyings with 1 factor.

deeds


Total Posts: 468
Joined: Dec 2008
 
Posted: 2020-02-06 18:05
2 asset case generalizes directly

see Cholesky decomposition
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