Markov chain Monte Carlo for computing rare-event probabilities for a heavy-tailed random walk
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Publication:5169731
DOI10.1239/JAP/1402578630zbMATH Open1291.65014arXiv1211.2207OpenAlexW2962818685MaRDI QIDQ5169731FDOQ5169731
Authors: Thorbjörn Gudmundsson, Henrik Hult 
Publication date: 11 July 2014
Published in: Journal of Applied Probability (Search for Journal in Brave)
Abstract: In this paper a method based on a Markov chain Monte Carlo (MCMC) algorithm is proposed to compute the probability of a rare event. The conditional distribution of the underlying process given that the rare event occurs has the probability of the rare event as its normalizing constant. Using the MCMC methodology a Markov chain is simulated, with that conditional distribution as its invariant distribution, and information about the normalizing constant is extracted from its trajectory. The algorithm is described in full generality and applied to the problem of computing the probability that a heavy-tailed random walk exceeds a high threshold. An unbiased estimator of the reciprocal probability is constructed whose normalized variance vanishes asymptotically. The algorithm is extended to random sums and its performance is illustrated numerically and compared to existing importance sampling algorithms.
Full work available at URL: https://arxiv.org/abs/1211.2207
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Computational methods in Markov chains (60J22) Monte Carlo methods (65C05) Sums of independent random variables; random walks (60G50)
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Cited In (12)
- Hastings-Metropolis algorithm on Markov chains for small-probability estimation
- Rare-event simulation of heavy-tailed random walks by sequential importance sampling and resampling
- Rare-event probability estimation with conditional Monte Carlo
- A sequential Monte Carlo approach to computing tail probabilities in stochastic models
- Efficient simulation and conditional functional limit theorems for ruinous heavy-tailed random walks
- A review of conditional rare event simulation for tail probabilities of heavy tailed random variables
- A dichotomy for sampling barrier-crossing events of random walks with regularly varying tails
- Efficient Rare-Event Simulation for Multiple Jump Events in Regularly Varying Random Walks and Compound Poisson Processes
- Markov chain importance sampling with applications to rare event probability estimation
- Inference and rare event simulation for stopped Markov processes via reverse-time sequential Monte Carlo
- MCMC design-based non-parametric regression for rare event. application to nested risk computations
- New efficient estimators in rare event simulation with heavy tails
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