Large Deviations of Factor Models with Regularly-Varying Tails: Asymptotics and Efficient Estimation
Statistics Theory
2019-12-10 v3 Statistics Theory
Abstract
We analyze the \textit{Large Deviation Probability (LDP)} of linear factor models generated from non-identically distributed components with \textit{regularly-varying} tails, a large subclass of heavy tailed distributions. An efficient sampling method for LDP estimation of this class is introduced and theoretically shown to exponentially outperform the crude Monte-Carlo estimator, in terms of the coverage probability and the confidence interval's length. The theoretical results are empirically validated through stochastic simulations on independent non-identically Pareto distributed factors. The proposed estimator is available as part of a more comprehensive \texttt{Betta} package.
Cite
@article{arxiv.1903.12299,
title = {Large Deviations of Factor Models with Regularly-Varying Tails: Asymptotics and Efficient Estimation},
author = {Farzad Pourbabaee and Omid Shams Solari},
journal= {arXiv preprint arXiv:1903.12299},
year = {2019}
}
Comments
25 pages