36 research outputs found
On the Efficient Simulation of the Left-Tail of the Sum of Correlated Log-normal Variates
The sum of Log-normal variates is encountered in many challenging
applications such as in performance analysis of wireless communication systems
and in financial engineering. Several approximation methods have been developed
in the literature, the accuracy of which is not ensured in the tail regions.
These regions are of primordial interest wherein small probability values have
to be evaluated with high precision. Variance reduction techniques are known to
yield accurate, yet efficient, estimates of small probability values. Most of
the existing approaches, however, have considered the problem of estimating the
right-tail of the sum of Log-normal random variables (RVS). In the present
work, we consider instead the estimation of the left-tail of the sum of
correlated Log-normal variates with Gaussian copula under a mild assumption on
the covariance matrix. We propose an estimator combining an existing
mean-shifting importance sampling approach with a control variate technique.
The main result is that the proposed estimator has an asymptotically vanishing
relative error which represents a major finding in the context of the left-tail
simulation of the sum of Log-normal RVs. Finally, we assess by various
simulation results the performances of the proposed estimator compared to
existing estimators
Monte Carlo Estimation of the Density of the Sum of Dependent Random Variables
We study an unbiased estimator for the density of a sum of random variables
that are simulated from a computer model. A numerical study on examples with
copula dependence is conducted where the proposed estimator performs favourably
in terms of variance compared to other unbiased estimators. We provide
applications and extensions to the estimation of marginal densities in Bayesian
statistics and to the estimation of the density of sums of random variables
under Gaussian copula dependence
Second Order Asymptotics of Aggregated Log-Elliptical Risk
In this paper we establish the error rate of first order asymptotic approximation for the tail probability of sums of log-elliptical risks. Our approach is motivated by extreme value theory which allows us to impose only some weak asymptotic conditions satisfied in particular by log-normal risks. Given the wide range of applications of the log-normal model in finance and insurance our result is of interest for both rare-event simulations and numerical calculations. We present numerical examples which illustrate that the second order approximation derived in this paper significantly improves over the first order approximation
The Mixed Logit Model: The State of Practice
The mixed logit model is considered to be the most promising state of the art discrete choice model currently available. Increasingly researchers and practitioners are estimating mixed logit models of various degrees of sophistication with mixtures of revealed preference and stated choice data. It is timely to review progress in model estimation since the learning curve is steep and the unwary are likely to fall into a chasm if not careful. These chasms are very deep indeed given the complexity of the mixed logit model. Although the theory is relatively clear, estimation and data issues are far from clear. Indeed there is a great deal of potential mis-inference consequent on trying to extract increased behavioural realism from data that are often not able to comply with the demands of mixed logit models. Possibly for the first time we now have an estimation method that requires extremely high quality data if the analyst wishes to take advantage of the extended behavioural capabilities of such models. This paper focuses on the new opportunities offered by mixed logit models and some issues to be aware of to avoid misuse of such advanced discrete choice methods by the practitioner