Figure 4 Histogram of loss distribution at 1 year
Convergence study
People normally believe that 50,000 simulations provide sufficient
stability to measure the 99.9th percentile loss
required for the regulatory IRC measure. However, our study shows that
50,000 paths are not convergent. Actually 100,000 simulations are needed
to archive a better numerical stability and convergence. The results are
shown in Table 1
Table 1 convergence results