Abstract
There are many situations where we want to estimate the probability of a rare event with some precision. For example if we toss a fair coin n times the probability of getting n heads in a row is clearly small, and for large n is very small. We know its exact value as 2−n and in logarithmic scale we can write it as e −n log 2. While in this case the exact probability is easy to evaluate, there are many situations in which a direct exact calculation is impossible and we need to develop indirect methods that will provide us with estimates.
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Varadhan, S.R.S. (2002). Rare Events, Large Deviations. In: Geman, H., Madan, D., Pliska, S.R., Vorst, T. (eds) Mathematical Finance — Bachelier Congress 2000. Springer Finance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-12429-1_5
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DOI: https://doi.org/10.1007/978-3-662-12429-1_5
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