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Create a Gaussian Random Number Generator in Excel

This model will have two inputs: σ and μ. Use the inverse transform method to create a series of normal variables with a mean of μ and standard deviation of σ. Use the Histogram tool in the Data Analysis toolbox of Excel to create a density function for one static example or use the Excel array function "FREQUENCY (data array, bin array)" and CTRL-SHIFTENTER to create a density function for dynamic data. See Figures 3-5 to 3-8.

Make sure to normalize the histogram-generated density function.
Choose the bins and bin sizes carefully (try different ranges). They will depend on the mean and σ. Start by getting the MIN and MAX points of the generated random numbers and then divide the space in between them into a certain number of bins (say, 40). See equations (3.48) and (3.49).

Generate at least 65,000 random numbers.
Calculate the mean, standard deviation, and kurtosis of the generated random numbers. Compare them to the inputs. Did the process converge?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91824822

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