Estimation of bivariate excess probabilities for elliptical models

Details Estimation of bivariate excess probabilities for elliptical models Estimation of bivariate excess probabilities for elliptical models

2006-11-29

arxiv.org/abs/math/0611914v4

Bernoulli 14, 4 (2008) 1065-1088

Mathematics

Statistics Theory

Published in at http://dx.doi.org/10.3150/08-BEJ140 the Bernoulli (http://isi.cbs.nl/bernoulli/) by the International Statisti

Scientific paper

10.3150/08-BEJ140

Let $(X,Y)$ be a random vector whose conditional excess probability $\theta(x,y):=P(Y\leq y | X>x)$ is of interest. Estimating this kind of probability is a delicate problem as soon as $x$ tends to be large, since the conditioning event becomes an extreme set. Assume that $(X,Y)$ is elliptically distributed, with a rapidly varying radial component. In this paper, three statistical procedures are proposed to estimate $\theta(x,y)$ for fixed $x,y$, with $x$ large. They respectively make use of an approximation result of Abdous et al. (cf. Canad. J. Statist. 33 (2005) 317--334, Theorem 1), a new second order refinement of Abdous et al.'s Theorem 1, and a non-approximating method. The estimation of the conditional quantile function $\theta(x,\cdot)^{\leftarrow}$ for large fixed $x$ is also addressed and these methods are compared via simulations. An illustration in the financial context is also given.

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