Optimal unbiased estimation for expected cumulative discounted cost

DOI10.1016/J.EJOR.2020.03.072MaRDI QIDQ2184152zbMATH OpenOpenAlexFDO

Authors Michael C. Fu, Yijie Peng, Lingjiong Zhu, Zhenyu Cui

Publication date 27 May 2020

Published in European Journal of Operational Research (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1804.04215

zbMATH Keywords

simulationsimulation optimizationunbiased estimationcomputing budget allocationcumulative costs

Mathematics Subject Classification ID

Monte Carlo methods (65C05) Computational methods for problems pertaining to operations research and mathematical programming (90-08)

Abstract: We consider estimating an expected infinite-horizon cumulative discounted cost/reward contingent on an underlying stochastic process by Monte Carlo simulation. An unbiased estimator based on truncating the cumulative cost at a random horizon is proposed. Explicit forms for the optimal distributions of the random horizon are given, and explicit expressions for the optimal random truncation level are obtained, leading to a full analysis of the bias-variance tradeoff when comparing this new class of randomized estimators with traditional fixed truncation estimators. Moreover, we characterize when the optimal randomized estimator is preferred over a fixed truncation estimator by considering the tradeoff between bias and variance. This comparison provides guidance on when to choose randomized estimators over fixed truncation estimators in practice. Numerical experiments substantiate the theoretical results.

Recommendations

• Simulating Discounted Costs
• Estimating the value of a discounted reward process
• A general method for debiasing a Monte Carlo estimator
• On Unbiased Estimation for Discretized Models
• Unbiased estimation with square root convergence for SDE models

Cites work

• A CLT for infinitely stratified estimators, with applications to debiased MLMC
• A general method for debiasing a Monte Carlo estimator
• Exact estimation for Markov chain equilibrium expectations
• Multilevel Monte Carlo Path Simulation
• Necessary Conditions for Optimal Control Problems with Infinite Horizons
• On Russian roulette estimates for Bayesian inference with doubly-intractable likelihoods
• On exact sampling of stochastic perpetuities
• On nonnegative unbiased estimators
• Resource Allocation Among Simulation Time Steps
• Simulating Discounted Costs
• Stochastic-Process Limits
• The Asymptotic Efficiency of Simulation Estimators
• Unbiased estimation with square root convergence for SDE models
• Unbiased estimators and multilevel Monte Carlo

Cited in

(2)

• Risk assessment and optimal scheduling of serial projects
• Simulating Discounted Costs

This page was built for publication: Optimal unbiased estimation for expected cumulative discounted cost

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q2184152)