[R] Monte Carlo Simulation Convergence test

Amelia Marsh amelia_marsh08 at yahoo.com
Mon Oct 26 08:44:38 CET 2015


Dear Forum, 

I have series of say 100 (say equity) instrument prices. From these prices, for each of these 100 instruments, I generate returns using ln(current price / previous price). 

Assuming originally I had 251 prices available for each of these 100 instruments over last one year period, I have matrix of 250X100 returns.

I assume that these returns follow Multivariate Normal Distribution. Using the returns, I generate a mean Vector of returns 'M' and also generate the Variance - covariance matrix of returns 'S'.

Then using MASS library, I simulate say 10000 returns for each of the 100 instruments as :

sim_rates = mvrnorm(10000, M, S) 

This gives me 10000 simulated returns for each of the 100 instruments and using these simulated returns carry out further analysis.

My query is how do I carry out convergence test in R to arrive at sufficint number of simulations? 


With reagrds

Amelia



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