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A matching algorithm for generation of statistically dependent random variables with arbitrary marginals

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  • Ilich, Nesa

Abstract

Simulation has gained acceptance in the operations research community as a viable method for analyzing complex problems. While random generation of variables with various marginal distributions has been studied at length, developing ability to preserve a given degree of statistical dependence among them has been lagging behind. This paper includes a short summary of the previous work and a description of the proposed algorithm for efficient re-arranging of generated random variables such that a desired product moment correlation matrix is induced. The proposed approach is different from similar algorithms that induce a desired rank-order correlation among random variables. The algorithm is demonstrated using three numerical examples, one of which also includes a comparison with @RISK commercial package. Its main features are simplicity, ease of implementation and the ability to handle either theoretical or empirical distribution functions.

Suggested Citation

  • Ilich, Nesa, 2009. "A matching algorithm for generation of statistically dependent random variables with arbitrary marginals," European Journal of Operational Research, Elsevier, vol. 192(2), pages 468-478, January.
  • Handle: RePEc:eee:ejores:v:192:y:2009:i:2:p:468-478
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    References listed on IDEAS

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    1. Philip M. Lurie & Matthew S. Goldberg, 1998. "An Approximate Method for Sampling Correlated Random Variables from Partially-Specified Distributions," Management Science, INFORMS, vol. 44(2), pages 203-218, February.
    2. Robert T. Clemen & Terence Reilly, 1999. "Correlations and Copulas for Decision and Risk Analysis," Management Science, INFORMS, vol. 45(2), pages 208-224, February.
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    Cited by:

    1. Đurica Marković & Jasna Plavšić & Nesa Ilich & Siniša Ilić, 2015. "Non-parametric Stochastic Generation of Streamflow Series at Multiple Locations," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 29(13), pages 4787-4801, October.

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