I found a matlab example for modelling correlated asset paths: http://www.goddardconsulting.ca/matlab-monte-carlo-assetpaths-corr.html In this model the author uses the matlab code chol() in order to ...
Does one use the covariance or correlation matrix in cholesky decomposition to generate correlated samples
Can we interchangeably use Cholesky decomposition of covariance and correlation matrix to generate simulations? If not, in which situations do we use one or the other and why? Thanks in advance.
I'm relatively new in this field, so I have a couple of points that I need to clarify. I would like to know how I can estimate the correlation matrix necessary to implement a Cholesky decomposition ...