Variance-Corrected Multi-Asset Equity Simulation with Hybrid Hidden Markov Marginals

Excerpt

arXiv:2603.10202v3 Announce Type: replace-cross Abstract: Synthetic multi-asset equity data must reproduce each asset's return distribution and its relationship with the market. Reusing a generator fitted to full asset returns creates a problem: adding its draws to a market factor counts market variance twice. We derived a correction that centers and rescales each draw over a fixed horizon before adding the market factor, allowing reuse without fitting a second generator to regression residuals.