Efficient importance sampling for Monte Carlo evaluation of exceedance probabilities

DOI10.1214/105051606000000664MaRDI QIDQ2455052zbMATH OpenOpenAlexFDO

Authors Hock Peng Chan, Tze Leung Lai

Publication date 22 October 2007

Published in The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/math/0703910

zbMATH Keywords

importance samplingnumerical exampleslarge deviationsrare eventsregenerationtail probabilitiesMarkov additive processboundary crossing probabilityMarkov random walkMonte Carlo evaluationasymptotically optimal importance sampling measureMarkov setting

Mathematics Subject Classification ID

Computational methods in Markov chains (60J22) Monte Carlo methods (65C05) Numerical analysis or methods applied to Markov chains (65C40) Large deviations (60F10) Sums of independent random variables; random walks (60G50) Discrete-time Markov processes on general state spaces (60J05)

Abstract: Large deviation theory has provided important clues for the choice of importance sampling measures for Monte Carlo evaluation of exceedance probabilities. However, Glasserman and Wang [Ann. Appl. Probab. 7 (1997) 731--746] have given examples in which importance sampling measures that are consistent with large deviations can perform much worse than direct Monte Carlo. We address this problem by using certain mixtures of exponentially twisted measures for importance sampling. Their asymptotic optimality is established by using a new class of likelihood ratio martingales and renewal theory.

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Cited in

(19)

• Importance sampling for a simple Markovian intensity model using subsolutions
• Minimization of a class of rare event probabilities and buffered probabilities of exceedance
• On an automatic and optimal importance sampling approach with applications in finance
• Modified importance sampling for performance evaluation and sensitivity analysis of computer simulation models
• Explicit computation of second order moments of importance sampling estimators for fractional Brownian motion
• Markov chain Monte Carlo for computing rare-event probabilities for a heavy-tailed random walk
• Bounded Relative Error Importance Sampling and Rare Event Simulation
• Random recurrence equations and ruin in a Markov-dependent stochastic economic environment
• On large deviations theory and asymptotically efficient Monte Carlo estimation
• The sample size required in importance sampling
• Discussion on “Is Average Run Length to False Alarm Always an Informative Criterion?” by Yajun Mei
• Discussion on “Sequential detection/isolation of abrupt changes” by Igor V. Nikiforov
• Cross-Entropy-Based Importance Sampling with Failure-Informed Dimension Reduction for Rare Event Simulation
• Efficient Simulation of Random Walks Exceeding a Nonlinear Boundary
• Importance Sampling and the Cyclic Approach
• Importance sampling for determining SRAM yield and optimization with statistical constraint
• A sequential Monte Carlo approach to computing tail probabilities in stochastic models
• A cross-entropy scheme for mixtures
• Dynamic importance sampling for uniformly recurrent Markov chains

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