# Help with Monte Carlow/Time series problem

• Jan 28th 2013, 05:53 AM
tobiasfunke92
Help with Monte Carlo/Time series problem
Attachment 26741

• Jan 28th 2013, 05:54 PM
chiro
Re: Help with Monte Carlow/Time series problem
Hey tobiasfunke92.

The inverse transform method has to do with simulating a random variable given a uniform distribution (which is built in to many computer packages by default). Here is some more information:

Inverse transform sampling - Wikipedia, the free encyclopedia

Basically, it means that if you can simulate U (a standard uniform) then you can simulate another continuous random variable by using Y = F^(-1)(Y) which will return a point for the Y distribution that corresponds to a realization.

What it does is it finds the point where the cumulative probability matches the realization of the uniform distribution and you "work backwards" to find what point on your complex distribution it corresponds to.
• Jan 29th 2013, 03:48 AM
tobiasfunke92
Re: Help with Monte Carlow/Time series problem
Oh I know that, it's just that the presence of the Gamma function in it is throwing me off. Do I need to integrate that first or do I not integrate it at all?
• Jan 29th 2013, 02:12 PM
chiro
Re: Help with Monte Carlow/Time series problem
You will have to integrate and solve numerically for Monte-Carlo work.