Year: 2026
Type: preprint
Abstract: We introduce ISCOS, a cross-entropy importance-sampling calibration method for rare credit-portfolio losses. We derive Gaussian and Gaussian--inverse-Gamma proposals and analyse the propagation of finite-COS approximation errors to the fitted parameters. Numerical experiments for Gaussian and Student t-copula credit portfolios show the efficiency of this method.
Source: arXiv (Cornell University)
Authors: Fang, Fang, Shen, Xiaoyu, Wang, Qinling
Institution: Delft University of Technology
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7204881723