ASSESSING CORRELATION STRUCTURES WITH SUBJECTIVE INFORMATION - AN INTERACTIVE APPROACH

The generation of correlated random variates requires a positive defin ite correlation matrix. This paper presents an interactive approach to generating a positive definite correlation matrix from subjective inf ormation. The procedure, implemented in a FORTRAN routine, facilities assessment of correlation structures determined from subjective consid erations by providing feedback on the feasibility of assumed correlati on structures. The routine was verified by applying it to a positive d efinite correlation matrix used in a capital investment simulation for a new papermaking technology illustrates how the procedure may be use d to assess possible correlation structures with subjective informatio n.