Large deviations for heavy-tailed factor models

DOI10.1016/J.SPL.2008.08.011MaRDI QIDQ1003783zbMATH OpenOpenAlexFDO

Authors Jens Svensson, Boualem Djehiche

Publication date 4 March 2009

Published in Statistics \& Probability Letters (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0712.0459

Mathematics Subject Classification ID

Large deviations (60F10) Sums of independent random variables; random walks (60G50)

Abstract: We study large deviation probabilities for a sum of dependent random variables from a heavy-tailed factor model, assuming that the components are regularly varying. We identify conditions where both the factor and the idiosyncratic terms contribute to the behaviour of the tail-probability of the sum. A simple conditional Monte Carlo algorithm is also provided together with a comparison between the simulations and the large deviation approximation. We also study large deviation probabilities for stochastic processes with factor structure. The processes involved are assumed to be Levy processes with regularly varying jump measures. Based on the results of the first part of the paper, we show that large deviations on a finite time interval are due to one large jump that can come from either the factor or the idiosyncratic part of the process.

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Cites work

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Cited in

(1)

• Jump factor models in large cross‐sections

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