Sensitivity estimation of conditional value at risk using randomized quasi-Monte Carlo

DOI10.1016/J.EJOR.2021.11.013MaRDI QIDQ2076930zbMATH OpenOpenAlexFDO

Authors Zhijian He

Publication date 22 February 2022

Published in European Journal of Operational Research (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1908.07232

zbMATH Keywords

conditional value at riskquasi-Monte Carlosensitivity estimationsimulationvalue at risk

Mathematics Subject Classification ID

Monte Carlo methods (65C05) Numerical integration (65D30) Numerical methods (including Monte Carlo methods) (91G60) Statistical methods; risk measures (91G70)

Abstract: Conditional value at risk (CVaR) is a popular measure for quantifying portfolio risk. Sensitivity analysis of CVaR is very useful in risk management and gradient-based optimization algorithms. In this paper, we study the infinitesimal perturbation analysis estimator for CVaR sensitivity using randomized quasi-Monte Carlo (RQMC) simulation. We first prove that the RQMC-based estimator is strongly consistent under very mild conditions. Under some technical conditions, RQMC that uses $d$-dimensional points in CVaR sensitivity estimation yields a mean error rate of $O(n^{-1/2-1/(4d-2)+epsilon})$ for arbitrarily small $epsilon>0$. The numerical results show that the RQMC method performs better than the Monte Carlo method for all cases. The gain of plain RQMC deteriorates as the dimension $d$ increases, as predicted by the established theoretical error rate.

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Cited in

(5)

• Simulating sensitivities of conditional value at risk
• Exploitation of sensitivity derivatives via randomized quasi-Monte Carlo methods
• Sensitivity Ranks by Monte Carlo
• Convergence analysis of quasi-Monte Carlo sampling for quantile and expected shortfall
• Extensible grid sampling for quantile estimation

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• sobol.cc

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