Complete the correlation matrix

Abstract

In this article we discuss a method to complete the correlation matrix in a multi-dimensional stochastic volatility model. We concentrate on the construction of a positive definite correlation matrix. Furthermore we present a numerical integration scheme for this system of stochastic differential equations which improves the approximation quality of the standard Euler-Maruyama method with minimal additional computational effort. © 2008 Springer-Verlag Berlin Heidelberg.