Second order asymptotics of aggregated log-elliptical risk

DOI10.1007/S11009-013-9356-5MaRDI QIDQ2513664zbMATHOpenAlexFDO

Authors Enkelejd Hashorva, Dominik Kortschak

Publication date 28 January 2015

Published in Methodology and Computing in Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1405.0605

zbMATH Keywords

Monte Carlo simulationlog-normal distributionrisk aggregationGumbel max-domain of attractionsecond order asymptoticslog-elliptical distribution

Mathematics Subject Classification ID

Monte Carlo methods (65C05) Gaussian processes (60G15) Extreme value theory; extremal stochastic processes (60G70) Limit theorems in probability theory (60F99)

Abstract: In this paper we establish the error rate of first order asymptotic approximation for the tail probability of sums of log-elliptical risks. Our approach is motivated by extreme value theory which allows us to impose only some weak asymptotic conditions satisfied in particular by log-normal risks. Given the wide range of applications of the log-normal model in finance and insurance our result is of interest for both rare-event simulations and numerical calculations. We present numerical examples which illustrate that the second order approximation derived in this paper significantly improves over the first order approximation.

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Cited in

(6)

• Second order asymptotics for infinite-time ruin probability in a compound renewal risk model
• On the tail probabilities of aggregated lognormal random fields with small noise
• Second-order asymptotics of the risk concentration of a portfolio with deflated risks
• Fast and accurate computation of the distribution of sums of dependent log-normals
• Tail behavior of sums and differences of log-normal random variables
• Tail asymptotics of random sum and maximum of log-normal risks

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