A Recursive Formula for Computing Central Moments of a Multivariate Lognormal Distribution

Author: Skoulakis, Georgios1

Source: The American Statistician, Volume 62, Number 2, May 2008 , pp. 147-150(4)

Publisher: American Statistical Association

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Abstract:

In this note, we develop a simple recursive formula for the efficient computation of all central moments of a multivariate lognormal distribution up to a given total order. This recursive scheme is found to speed up the computation by a factor of up to 75 compared to an existing explicit formula in the cases we consider. We also present an application to multi-asset portfolio choice.

Keywords: EFFICIENT COMPUTATION OF MOMENTS; LOGNORMAL DISTRIBUTION; PORTFOLIO CHOICE

Document Type: Regular paper

DOI: 10.1198/000313008X304350

Affiliations: 1: Department of Finance, Robert H. Smith School of Business, University of Maryland, 4453 Van Munching Hall, College Park, MD 20742

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