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Efficient Simulation for Dependent Rare Events with Applications to Extremes

Author

Listed:
  • Lars Nørvang Andersen

    (Aarhus University)

  • Patrick J. Laub

    (University of Queensland and Aarhus University)

  • Leonardo Rojas-Nandayapa

    (University of Liverpool)

Abstract

We consider the general problem of estimating probabilities which arise as a union of dependent events. We propose a flexible series of estimators for such probabilities, and describe variance reduction schemes applied to the proposed estimators. We derive efficiency results of the estimators in rare-event settings, in particular those associated with extremes. Finally, we examine the performance of our estimators in numerical examples.

Suggested Citation

  • Lars Nørvang Andersen & Patrick J. Laub & Leonardo Rojas-Nandayapa, 2018. "Efficient Simulation for Dependent Rare Events with Applications to Extremes," Methodology and Computing in Applied Probability, Springer, vol. 20(1), pages 385-409, March.
    • Handle: RePEc:spr:metcap:v:20:y:2018:i:1:d:10.1007_s11009-017-9557-4
    DOI: 10.1007/s11009-017-9557-4
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    References listed on IDEAS

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    5. Nolde, Natalia, 2014. "Geometric interpretation of the residual dependence coefficient," Journal of Multivariate Analysis, Elsevier, vol. 123(C), pages 85-95.
    6. Alexander J. McNeil & Rüdiger Frey & Paul Embrechts, 2015. "Quantitative Risk Management: Concepts, Techniques and Tools Revised edition," Economics Books, Princeton University Press, edition 2, number 10496.
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