Generating Random Numbers with Specified Distributions
For the simulation and valuation of finance instruments we require numbers with specified distributions. For example. in Section 1.6 we have used numbers Z that were drawn from a standard normal distribution, Z ∼ N(0, 1). If possible the numbers should be random. But the generation of “random numbers” by digital computers, after all, is done in a deterministic and entirely predictable way. If this point is to be stressed, one uses the term pseudorandom.
KeywordsGenerate Random Standard Normal Variate Parallel Straight Line Monte Carlo Integration Normal Deviate
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- 1.Since in our context the predictable origin is clear we omit the modifier “pseudo,” and hereafter use the term random number. Similarly we talk about randomness of these numbers when we mean apparent randomness.Google Scholar
- 2.f is zero outside S. In this section S is no asset price.Google Scholar