Nested simulation in portfolio risk measurement / Michael B. Gordy in Management science, Vol. 56 N° 10 (Octobre 2010)  

Public ISBD [article]  inManagement science > Vol. 56 N° 10 (Octobre 2010) . - pp. 1833-1848 Titre : Nested simulation in portfolio risk measurement Type de document : texte imprimé Auteurs : Michael B. Gordy, Auteur ; Sandeep Juneja, Auteur Année de publication : 2010 Article en page(s) : pp. 1833-1848 Note générale : Management Langues : Anglais (eng) Mots-clés : Nested simulation Loss distribution Value-at-risk Expected shortfall Jackknife estimator Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : Risk measurement for derivative portfolios almost invariably calls for nested simulation. In the outer step, one draws realizations of all risk factors up to the horizon, and in the inner step, one reprices each instrument in the portfolio at the horizon conditional on the drawn risk factors. Practitioners may perceive the computational burden of such nested schemes to be unacceptable and adopt a variety of second-best pricing techniques to avoid the inner simulation. In this paper, we question whether such short cuts are necessary. We show that a relatively small number of trials in the inner step can yield accurate estimates, and we analyze how a fixed computational budget may be allocated to the inner and the outer step to minimize the mean square error of the resultant estimator. Finally, we introduce a jackknife procedure for bias reduction. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/cgi/content/abstract/56/10/1833 [article] Nested simulation in portfolio risk measurement [texte imprimé] / Michael B. Gordy, Auteur ; Sandeep Juneja, Auteur . - 2010 . - pp. 1833-1848. Management Langues : Anglais (eng) in Management science > Vol. 56 N° 10 (Octobre 2010) . - pp. 1833-1848 Mots-clés : Nested simulation Loss distribution Value-at-risk Expected shortfall Jackknife estimator Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : Risk measurement for derivative portfolios almost invariably calls for nested simulation. In the outer step, one draws realizations of all risk factors up to the horizon, and in the inner step, one reprices each instrument in the portfolio at the horizon conditional on the drawn risk factors. Practitioners may perceive the computational burden of such nested schemes to be unacceptable and adopt a variety of second-best pricing techniques to avoid the inner simulation. In this paper, we question whether such short cuts are necessary. We show that a relatively small number of trials in the inner step can yield accurate estimates, and we analyze how a fixed computational budget may be allocated to the inner and the outer step to minimize the mean square error of the resultant estimator. Finally, we introduce a jackknife procedure for bias reduction. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/cgi/content/abstract/56/10/1833

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