Sampling Correlated Asset Paths

[DanM]

I've seen some do this by performing Cholesky factorization on the correlation matrix and some by performing it in the covariance matrix. Which way is correct?

 

[Brad Warren]

You could do it either way. Starting with a vector of uncorrelated standard normals, using the covariance matrix is more direct since you have to factor in the individual volatilities anyway.