Can somebody please explain to me what is the intuition behind the cholesky decomposition when generating correlated random variables? The funny thing is that i know how to calculate it, the thing is that I have no idea why it works.......
In my Monte Carlo simulator i generate a choleski deco on correlation matrix, mulitply it with vector of uncorelated standard normals , rescale the normals and get nice results...But why does multiplying Cholesky lower triangular by uncorelated vector gives me correlated one? I saw some simbolic, very general explanation but somehow I just dont get it.......
Advertise on Talk Stats