Efficient simulation of large deviation events for sums of random vectors using saddle-point representations

DOI10.1239/JAP/1378401231zbMATH Open1282.65025arXiv1203.0817OpenAlexW2074851174MaRDI QIDQ2854076FDOQ2854076

Authors: Ankush Agarwal, S. Juneja, Santanu Dey 

Publication date: 17 October 2013

Published in: Journal of Applied Probability (Search for Journal in Brave)

Abstract: We consider the problem of efficient simulation estimation of the density function at the tails, and the probability of large deviations for a sum of independent, identically distributed, light-tailed and non-lattice random vectors. The latter problem besides being of independent interest, also forms a building block for more complex rare event problems that arise, for instance, in queueing and financial credit risk modelling. It has been extensively studied in literature where state independent exponential twisting based importance sampling has been shown to be asymptotically efficient and a more nuanced state dependent exponential twisting has been shown to have a stronger bounded relative error property. We exploit the saddle-point based representations that exist for these rare quantities, which rely on inverting the characteristic functions of the underlying random vectors. These representations reduce the rare event estimation problem to evaluating certain integrals, which may via importance sampling be represented as expectations. Further, it is easy to identify and approximate the zero-variance importance sampling distribution to estimate these integrals. We identify such importance sampling measures and show that they possess the asymptotically vanishing relative error property that is stronger than the bounded relative error property. To illustrate the broader applicability of the proposed methodology, we extend it to similarly efficiently estimate the practically important expected overshoot of sums of iid random variables.

Full work available at URL: https://arxiv.org/abs/1203.0817

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zbMATH Keywords

importance samplingalgorithmlarge deviationsMonte Carlo methodnumerical experimentrare event simulationsaddle-point approximationFourier inversionexponential twisting method

Mathematics Subject Classification ID

Characteristic functions; other transforms (60E10) Monte Carlo methods (65C05) Large deviations (60F10)

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Cited In (3)

• Efficient simulation of light-tailed sums: An old-folk song sung to a faster new tune\dots
• Efficient rare event simulation for heavy-tailed compound sums
• State-independent Importance Sampling for Random Walks with Regularly Varying Increments

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