Rare - Event , Heavy - Tailed Simulations Using Hazard Function Transformations , with Applications to Value - at - Risk
نویسندگان
چکیده
We develop an observation that a simulation method introduced recently for heavy-tailed stochastic simulation, namely hazard-rate twisting, is equivalent to doing exponential twisting on a transformed version of the heavy-tailed random-variable; the transforming function is the hazard function. Using this approach, the paper develops efficient methods for computing portfolio value-at-risk (VAR) when changes in the underlying risk factors have the multivariate Laplace distribution.
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