Advanced Search
MyIDEAS: Login to save this article or follow this journal

Better Confidence Intervals For Importance Sampling

Contents:

Author Info

  • HALIS SAK

    ()
    (Department of Statistics and Mathematics, WU (Vienna University of Economics and Business), Augasse 2–6, A-1090 Wien, Austria)

  • WOLFGANG HÖRMANN

    ()
    (Department of Industrial Engineering, Boğaziçi University, 34342 Bebek-İstanbul, Turkey)

  • JOSEF LEYDOLD

    ()
    (Department of Statistics and Mathematics, WU (Vienna University of Economics and Business), Augasse 2–6, A-1090 Wien, Austria)

Registered author(s):

    Abstract

    It is well known that for highly skewed distributions the standard method of using the t statistic for the confidence interval of the mean does not give robust results. This is an important problem for importance sampling (IS) as its final distribution is often skewed due to a heavy tailed weight distribution. In this paper, we first explain Hall's transformation and its variants to correct the confidence interval of the mean and then evaluate the performance of these methods for two numerical examples from finance which have closed-form solutions. Finally, we assess the performance of these methods for credit risk examples. Our numerical results suggest that Hall's transformation or one of its variants can be safely used in correcting the two-sided confidence intervals of financial simulations.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.worldscinet.com/cgi-bin/details.cgi?type=pdf&id=pii:S0219024910006200
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: http://www.worldscinet.com/cgi-bin/details.cgi?type=html&id=pii:S0219024910006200
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.

    Volume (Year): 13 (2010)
    Issue (Month): 08 ()
    Pages: 1279-1291

    as in new window
    Handle: RePEc:wsi:ijtafx:v:13:y:2010:i:08:p:1279-1291

    Contact details of provider:
    Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml

    Order Information:
    Email:

    Related research

    Keywords: Confidence intervals; skewness removal; Hall's transformation; importance sampling; quantitative risk management;

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:13:y:2010:i:08:p:1279-1291. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.