Sensitivity estimation of conditional value at risk using randomized quasi-Monte Carlo (1908.07232v2)

Abstract: Conditional value at risk (CVaR) is a popular measure for quantifying portfolio risk. Sensitivity analysis of CVaR is very useful in risk management and gradient-based optimization algorithms. In this paper, we study the infinitesimal perturbation analysis estimator for CVaR sensitivity using randomized quasi-Monte Carlo (RQMC) simulation. We first prove that the RQMC-based estimator is strongly consistent under very mild conditions. Under some technical conditions, RQMC that uses $d$-dimensional points in CVaR sensitivity estimation yields a mean error rate of $O(n^{-1/2-1/(4d-2)+\epsilon})$ for arbitrarily small $\epsilon>0$. The numerical results show that the RQMC method performs better than the Monte Carlo method for all cases. The gain of plain RQMC deteriorates as the dimension $d$ increases, as predicted by the established theoretical error rate.