Efficient Rare-Event Simulation for Multiple Jump Events in Regularly Varying L\'evy Processes with Infinite Activities

arXiv2007.08080MaRDI QIDQ6345201FDOQ6345201

Authors: Xingyu Wang, Chang-Han Rhee 

Publication date: 15 July 2020

Abstract: In this paper we address the problem of rare-event simulation for heavy-tailed L'evy processes with infinite activities. We propose a strongly efficient importance sampling algorithm that builds upon the sample path large deviations for heavy-tailed L'evy processes, stick-breaking approximation of extrema of L'evy processes, and the randomized debiasing Monte Carlo scheme. The proposed importance sampling algorithm can be applied to a broad class of L'evy processes and exhibits significant improvements in efficiency when compared to crude Monte-Carlo method in our numerical experiments.

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