An importance sampling approach for copula models in insurance

Philipp Arbenz, Mathieu Cambou and Marius Hofert

Papers from arXiv.org

Abstract: An importance sampling approach for sampling copula models is introduced. We propose two algorithms that improve Monte Carlo estimators when the functional of interest depends mainly on the behaviour of the underlying random vector when at least one of the components is large. Such problems often arise from dependence models in finance and insurance. The importance sampling framework we propose is general and can be easily implemented for all classes of copula models from which sampling is feasible. We show how the proposal distribution of the two algorithms can be optimized to reduce the sampling error. In a case study inspired by a typical multivariate insurance application, we obtain variance reduction factors between 10 and 30 in comparison to standard Monte Carlo estimators.

Date: 2014-03, Revised 2015-04
New Economics Papers: this item is included in nep-ecm and nep-ias
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Citations: View citations in EconPapers (1)

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