Reducing Variation of Risk Estimation by Using Importance Sampling

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Alphanumeric Journal
Volume:7 Issue:2
Reducing Variation of Risk Estimation by Using Importance Sampling

Reducing Variation of Risk Estimation by Using Importance Sampling

Authors : Hatem ÇOBAN, İpek DEVECİ KOCAKOÇ, Şemsettin ERKEN, Mehmet Akif AKSOY

Pages : 173-184

Doi:10.17093/alphanumeric.605584

View : 35 | Download : 8

Publication Date : 2019-12-31

Article Type : Research Paper

Abstract :In today`s world, risk measurement and risk management are of great importance for various economic reasons. Especially in the crisis periods, the tail risk becomes very important in risk estimation. Many methods have been developed for accurate measurement of risk. The easiest of these methods is the Value at Risk insert ignore into journalissuearticles values(VaR); method. However, standard VaR methods are not very effective in tail risks. This study aims to demonstrate the usage of delta normal method, historical simulation method, Monte Carlo simulation, and importance sampling to calculate the value at risk and to show which method is more effective by applying them to the S&P index between 1993 and 2003.
Keywords : Importance Sampling, Value at Risk, Monte Carlo Simulation, Delta Normal Method, Tail Risk

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