Efficient rare-event simulation for perpetuities

DOI10.1016/J.SPA.2012.05.002zbMATH Open1254.65019arXiv1201.3419OpenAlexW2593887383MaRDI QIDQ449227FDOQ449227

Authors: Jose Blanchet, Henry Lam, Bert Zwart 

Publication date: 12 September 2012

Published in: Stochastic Processes and their Applications (Search for Journal in Brave)

Abstract: We consider perpetuities of the form D = B_1 exp(Y_1) + B_2 exp(Y_1+Y_2) + ... where the Y_j's and B_j's might be i.i.d. or jointly driven by a suitable Markov chain. We assume that the Y_j's satisfy the so-called Cramer condition with associated root theta_{ast} in (0,infty) and that the tails of the B_j's are appropriately behaved so that D is regularly varying with index theta_{ast}. We illustrate by means of an example that the natural state-independent importance sampling estimator obtained by exponentially tilting the Y_j's according to theta_{ast} fails to provide an efficient estimator (in the sense of appropriately controlling the relative mean squared error as the tail probability of interest gets smaller). Then, we construct estimators based on state-dependent importance sampling that are rigorously shown to be efficient.

Full work available at URL: https://arxiv.org/abs/1201.3419

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zbMATH Keywords

numerical examplesMarkov chainstail asymptoticsperpetuitiesLyapunov inequalitiesstate-dependent importance sampling

Mathematics Subject Classification ID

Computational methods in Markov chains (60J22) Point estimation (62F10) Numerical analysis or methods applied to Markov chains (65C40) Sampling theory, sample surveys (62D05)

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Cited In (7)

• On exact sampling of stochastic perpetuities
• Rare event simulation for processes generated via stochastic fixed point equations
• Importance sampling for maxima on trees
• Importance sampling of heavy-tailed iterated random functions
• Rare-event simulation for neural network and random forest predictors
• Exact simulation of generalised Vervaat perpetuities
• Rare event simulation for steady-state probabilities via recurrency cycles

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