Related papers: Efficient Exponential Tilting for Portfolio Credit…
In this paper, we propose efficient importance sampling estimators to evaluate the outage probability of maximum ratio combining receivers over turbulence-induced fadings in underwater wireless optical channels. We consider two fading…
In this paper we assume a multivariate risk model has been developed for a portfolio and its capital derived as a homogeneous risk measure. The Euler (or gradient) principle, then, states that the capital to be allocated to each component…
This paper studies the consequences of capturing non-linear dependence among the covariates that drive the default of different obligors and the overall riskiness of their credit portfolio. Joint default modeling is, without loss of…
We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
Some classical uncertainty quantification problems require the estimation of multiple expectations. Estimating all of them accurately is crucial and can have a major impact on the analysis to perform, and standard existing Monte Carlo…
To efficiently evaluate system reliability based on Monte Carlo simulation, importance sampling is used widely. The optimal importance sampling density was derived in 1950s for the deterministic simulation model, which maps an input to an…
We propose a credit risk model for portfolios composed of green and brown loans, extending the ASRF framework via a two-factor copula structure. Systematic risk is modeled using potentially skewed distributions, allowing for asymmetric…
We calibrate a Natural History Model, which is a class of computer simulator used in the health industry, and here has been used to characterise bowel cancer incidence for the UK. The simulator tracks the development of bowel cancer in a…
This paper addresses the estimation of the systemic risk measure known as CoVaR, which quantifies the risk of a financial portfolio conditional on another portfolio being at risk. We identify two principal challenges: conditioning on a…
Estimating probability of failure in aerospace systems is a critical requirement for flight certification and qualification. Failure probability estimation involves resolving tails of probability distribution, and Monte Carlo sampling…
Reliable estimation of feature contributions in machine learning models is essential for trust, transparency and regulatory compliance, especially when models are proprietary or otherwise operate as black boxes. While permutation-based…
Credit risk in the China's bond market has become increasingly evident, creating a progressively escalating risk of default for credit bond investors. Given the current incomplete and inaccurate bond information disclosure, timely tracking…
We introduce a model for the loss distribution of a credit portfolio considering a contagion mechanism for the default of names which is the result of two independent components: an infection attempt generated by defaulting entities and a…
Credit default poses significant challenges to financial institutions and consumers, resulting in substantial financial losses and diminished trust. As such, credit default risk management has been a critical topic in the financial…
Driven by applications in telecommunication networks, we explore the simulation task of estimating rare event probabilities for tandem queues in their steady state. Existing literature has recognized that importance sampling methods can be…
Diffusion in a linear potential in the presence of position-dependent killing is used to mimic a default process. Different assumptions regarding transport coefficients, initial conditions, and elasticity of the killing measure lead to…
Monte Carlo Approaches for calculating Value-at-Risk (VaR) are powerful tools widely used by financial risk managers across the globe. However, they are time consuming and sometimes inaccurate. In this paper, a fast and accurate Monte Carlo…
We discuss estimating the probability that the sum of nonnegative independent and identically distributed random variables falls below a given threshold, i.e., $\mathbb{P}(\sum_{i=1}^{N}{X_i} \leq \gamma)$, via importance sampling (IS). We…