Large deviations for heavy-tailed factor models
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Publication:1003783
DOI10.1016/J.SPL.2008.08.011zbMATH Open1157.60023arXiv0712.0459OpenAlexW2046340125MaRDI QIDQ1003783FDOQ1003783
Jens Svensson, Boualem Djehiche
Publication date: 4 March 2009
Published in: Statistics \& Probability Letters (Search for Journal in Brave)
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.
Full work available at URL: https://arxiv.org/abs/0712.0459
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