Efficient Risk Simulations for Linear Asset Portfolios

Sak, Halis and Hörmann, Wolfgang and Leydold, Josef (2008) Efficient Risk Simulations for Linear Asset Portfolios. Research Report Series / Department of Statistics and Mathematics, 80. Department of Statistics and Mathematics, WU Vienna University of Economics and Business, Vienna.


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We consider the problem of calculating tail probabilities of the returns of linear asset portfolios. As flexible and accurate model for the logarithmic returns we use the $t$-copula dependence structure and marginals following the generalized hyperbolic distribution. Exact calculation of the tail-loss probabilities is not possible and even simulation leads to challenging numerical problems. Applying a new numerical inversion method for the generation of the marginals and importance sampling with carefully selected mean shift we develop an efficient simulation algorithm. Numerical results for a variety of realistic portfolio examples show an impressive performance gain. (author´s abstract)

Item Type: Paper
Keywords: Risk management / importance sampling / linear asset portfolio / t-copula / generalized hyperbolic distribution
Divisions: Departments > Finance, Accounting and Statistics > Statistics and Mathematics
Depositing User: Repository Administrator
Date Deposited: 22 Dec 2008 10:37
Last Modified: 22 Oct 2019 00:41
URI: https://epub.wu.ac.at/id/eprint/1200


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