Stochastic simulation of rare events

Gatto, Riccardo (2015). Stochastic simulation of rare events. In: StatsRef: Statistics Reference Online (pp. 1-11). Wiley 10.1002/9781118445112.stat07823

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Stochastic simulation is an important and practical technique for computing probabilities of rare events, like the payoff probability of a financial option, the probability that a queue exceeds a certain level or the probability of ruin of the insurer's risk process. Rare events occur so infrequently, that they cannot be reasonably recorded during a standard simulation procedure: specifc simulation algorithms which thwart the rarity of the event to simulate are required. An important algorithm in this context is based on changing the sampling distribution and it is called importance sampling. Optimal Monte Carlo algorithms for computing rare event probabilities are either logarithmic eficient or possess bounded relative error.

Item Type:

Book Section (Encyclopedia Article)

Division/Institute:

08 Faculty of Science > Department of Mathematics and Statistics > Institute of Mathematical Statistics and Actuarial Science

UniBE Contributor:

Gatto, Riccardo

Subjects:

500 Science > 510 Mathematics

Publisher:

Wiley

Language:

English

Submitter:

Lutz Dümbgen

Date Deposited:

07 Apr 2016 10:50

Last Modified:

26 Jun 2016 02:13

Publisher DOI:

10.1002/9781118445112.stat07823

BORIS DOI:

10.7892/boris.77831

URI:

https://boris.unibe.ch/id/eprint/77831

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