The Inverse Transform Method
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1. Context
In this short video from FRM Part 1 curriculum, we take a look at the inverse Transform Method used for repeatedly sampling or simulating a random variable that is stated to follow a certain (given) distribution. This technique comes in handy when we simulate future realizations of interest rates in FRM Part 2. The details of the reading in which this topic appears are given below:
| Area | Quantitative Analysis |
| Reading | Simulation Methods |
| Reference | Chris Brooks, Chapter 13. Simulation Methods In Introductory Econometrics for Finance, 3rd Edition, (Cambridge, UK: Cambridge University Press, 2014). |