Generating correlated bivariate normal variables

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Generating Correlated Bivariate Normal Variables

If z1 and z2 are independent standard normal variables N(0, 1), one can create correlated bivariate normal variables with the following transformation,

Step 1: Calculate E [?₁²], E [?₂ ²], E [?₁ ?₂].

Step 2: Generate 10000 bivariate normal random variables using Excel and the above transformation [recall the use of NORMSINV (Rand ())].

Step 3: Calculate E [?₁?₂] for your generated 10000 variables. Does the answer make sense?

Reference no: EM131086836

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