When running Monte Carlo type simulations in situations where you're only interested in tail outcomes, do you know of a way to only simulate those outcomes, so that you can come up with more reliable answers in fewer simulations.
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$\begingroup$ "Importance Sampling" is the keyword you are looking for. For a start you might look in Paul Glasserman's book on Monte Carlo Methods for Financial Engineering. $\endgroup$– Stephan SturmCommented Nov 19, 2015 at 14:01
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$\begingroup$ Thanks a ton, Stephan! I am not very good at this kind of mathematics. Can you explain be the concept in layman terms? An example, maybe? TIA! $\endgroup$– aayush anandCommented Nov 19, 2015 at 14:07
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$\begingroup$ Sorry, but this is really not the site for layman's term questions, it is a site for questions people have that do math for a living. Moreover a quick google search should be enough to give you some ideas. $\endgroup$– Stephan SturmCommented Nov 19, 2015 at 14:11
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$\begingroup$ Okay, apologies! Thanks for taking time out. $\endgroup$– aayush anandCommented Nov 19, 2015 at 14:15
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