Title :
An efficient simulation procedure for point estimation of expected shortfall
Author :
Liu, Ming ; Nelson, Barry L. ; Staum, Jeremy
Author_Institution :
Dept. of Ind. Eng. & Manage. Sci., Northwestern Univ., Evanston, IL, USA
Abstract :
We present a computationally efficient simulation procedure for point estimation of expected shortfall. The procedure applies tools for ranking and selection to allocate more computational resources to estimation of the largest losses, which are those that affect expected shortfall. Given a fixed computational budget, our procedure estimates expected shortfall with a much lower mean squared error than a standard simulation procedure and much more precisely than an existing interval estimation procedure.
Keywords :
estimation theory; investment; risk management; simulation; computationally efficient simulation procedure; expected shortfall point estimation; fixed computational budget; interval estimation procedure; largest loss estimation; mean squared error; ranking and selection; standard simulation procedure; Analytical models; Computational modeling; Estimation; Mathematical model; Monte Carlo methods; Portfolios; Security;
Conference_Titel :
Simulation Conference (WSC), Proceedings of the 2010 Winter
Conference_Location :
Baltimore, MD
Print_ISBN :
978-1-4244-9866-6
DOI :
10.1109/WSC.2010.5678977