Correlated Wiener Processes

Initializing live version
Download to Desktop

Requires a Wolfram Notebook System

Interact on desktop, mobile and cloud with the free Wolfram Player or other Wolfram Language products.

This Demonstration displays the paths of two correlated Wiener processes.

[more]

The concept of correlated stochastic processes is extremely important, particularly in areas of finance such as portfolio theory, but it can be somewhat counterintuitive, since highly correlated processes with very different diffusion and drift coefficients can look very different. You can gain an intuitive understanding of this concept by varying each of the parameters independently and observing the changes in the shape of the correlated paths.

[less]

Contributed by: Andrzej Kozlowski (March 2011)
Open content licensed under CC BY-NC-SA


Snapshots


Details

There are several ways to generate correlated processes. This Demonstration reveals the following simple fact: if ,) are a pair of uncorrelated standard normal random variables then are a pair of standard normal variables with correlation coefficient .



Feedback (field required)
Email (field required) Name
Occupation Organization
Note: Your message & contact information may be shared with the author of any specific Demonstration for which you give feedback.
Send