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arXiv · 2608.30749

Importance Sampling Enhanced with the COS Method for the Portfolio Risk Allocation

Fang Fang·Xiaoyu Shen·Qinling Wang
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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.

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Fang Fang, Xiaoyu Shen, Qinling Wang. 2026-08-31. Importance Sampling Enhanced with the COS Method for the Portfolio Risk Allocation. https://arxiv.org/abs/2608.30749

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