DOCSLIB.ORG

Simulation Efficiency and an Introduction to Variance Reduction

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Simulation Efficiency and an Introduction to Variance Reduction Monte Carlo Simulation: IEOR E4703 c 2017 by Martin Haugh Columbia University Simulation Efficiency and an Introduction to Variance Reduction Methods In these notes we discuss the efficiency of a Monte-Carlo estimator. This naturally leads to the search for more efficient estimators and towards this end we describe some simple variance reduction techniques. In particular, we describe control variates, antithetic variates and conditional Monte-Carlo, all of which are designed to reduce the variance of our Monte-Carlo estimators. We will defer a discussion of other variance reduction techniques such as common random numbers, stratified sampling and importance sampling until later. 1 Simulation Efficiency Suppose as usual that we wish to estimate θ := E[h(X)]. Then the standard simulation algorithm is: 1. Generate X1;:::; Xn Pn 2. Estimate θ with θbn = j=1 Yj=n where Yj := h(Xj). 3. Approximate 100(1 − α)% confidence intervals are then given by σbn σbn θbn − z1−α/2 p ; θbn + z1−α/2 p n n where σbn is the usual estimate of Var(Y ) based on Y1;:::;Yn. One way to measure the quality of the estimator, θbn, is by the half-width, HW , of the confidence interval. For a fixed α, we have r Var(Y ) HW = z : 1−α/2 n We would like HW to be small, but sometimes this is difficult to achieve. This may be because Var(Y ) is too large, or too much computational effort is required to simulate each Yj so that n is necessarily small, or some combination of the two. As a result, it is often imperative to address the issue of simulation efficiency. There are a number of things we can do: 1. Develop a good simulation algorithm. 2. Program carefully to minimize storage requirements. For example we do not need to store all the Yj's: we P P 2 only need to keep track of Yj and Yj to compute θbn and approximate CI's. 3. Program carefully to minimize execution time. 4. Decrease the variability of the simulation output that we use to estimate θ. The techniques used to do this are usually called variance reduction techniques. We will now study some of the simplest variance reduction techniques, and assume that we are doing items (1) to (3) as well as possible. Before proceeding to study these techniques, however, we should first describe a measure of simulation efficiency. Simulation Efficiency and an Introduction to Variance Reduction Methods 2 1.1 Measuring Simulation Efficiency Suppose there are two random variables, W and Y , such that E[W ] = E[Y ] = θ. Then we could choose to either simulate W1;:::;Wn or Y1;:::;Yn in order to estimate θ. Let Mw denote the method of estimating θ by simulating the Wi's. My is similarly defined. Which method is more efficient, Mw or My? To answer this, let nw and ny be the number of samples of W and Y , respectively, that are needed to achieve a half-width, HW . Then we know that z 2 n = 1−α/2 Var(W ) w HW z 2 n = 1−α/2 Var(Y ): y HW Let Ew and Ey denote the amount of computational effort required to produce one sample of W and Y , respectively. Then the total effort expended by Mw and My, respectively, to achieve a half width HW are z 2 TE = 1−α/2 Var(W ) E w HW w z 2 TE = 1−α/2 Var(Y ) E : y HW y We then say that Mw is more efficient than My if TEw < T Ey. Note that TEw < T Ey if and only if Var(W )Ew < Var(Y )Ey: (1) We will use the quantity Var(W )Ew as a measure of the efficiency of the simulator, Mw. Note that (1) implies we cannot conclude that one simulation algorithm, Mw, is better than another, My, simply because Var(W ) < Var(Y ); we also need to take Ew and Ey into consideration. However, it is often the case that we have two simulators available to us, Mw and My, where Ew ≈ Ey and Var(W ) << Var(Y ). In such cases it is clear that using Mw provides a substantial improvement over using My. 2 Control Variates Suppose you wish to determine the mean midday temperature, θ, in Grassland and that your data consists of f(Ti;Ri): i = 1; : : : ng where Ti and Ri are the midday temperature and daily rainfall, respectively, on some random day, Di. Then θ = E[T ] is the mean midday temperature.If the Di's are drawn uniformly from f1;:::; 365g, then an obvious estimator for θ is Pn i=1 Ti θbn = n and we then know that E[θbn] = θ. Suppose, however, that we also know: 1. E[R], the mean daily rainfall in Grassland 2. Ri and Ti are dependent; in particular, it tends to rain more in the cold season Is there any way we can exploit this information to obtain a better estimate of θ? The answer of course, is yes. Pn Let Rn := i=1 Ri=n and now suppose Rn > E[R]. Then this implies that the Di's over-represent the rainy season in comparison to the dry season. But since the rainy season tends to coincide with the cold season, it also means that the Di's over-represent the cold season in comparison to the warm season. As a result, we expect θbn < θ. Therefore, to improve our estimate, we should increase θbn. Similarly, if Rn < E[R], we should decrease θbn. In this example, rainfall is the control variate since it enables us to better control our estimate of θ. The principle idea behind many variance reduction techniques (including control variates) is to \use what you know" Simulation Efficiency and an Introduction to Variance Reduction Methods 3 about the system. In this example, the system is Grassland's climate, and what we know is E[R], the average daily rainfall. We will now study control variates more formally, and in particular, we will determine by how much we should increase or decrease θbn. 2.1 The Control Variate Method Suppose again that we wish to estimate θ := E[Y ] where Y = h(X) is the output of a simulation experiment. Suppose that Z is also an output of the simulation or that we can easily output it if we wish. Finally, we assume that we know E[Z]. Then we can construct many unbiased estimators of θ: 1. θb = Y , our usual estimator 2. θbc := Y + c(Z − E[Z]) for any c 2 R. The variance of θbc satisfies 2 Var(θbc) = Var(Y ) + c Var(Z) + 2c Cov(Y; Z): (2) and we can choose c to minimize this quantity. Simple calculus then implies the optimal value of c is given by Cov(Y; Z) c∗ = − Var(Z) and that the minimized variance satisfies Cov(Y; Z)2 Var(θbc∗ ) = Var(Y ) − Var(Z) Cov(Y; Z)2 = Var(θb) − : Var(Z) In order to achieve a variance reduction it is therefore only necessary that Cov(Y; Z) 6= 0. The new resulting Monte Carlo algorithm proceeds by generating n samples of Y and Z and then setting Pn ∗ i=1 (Yi + c (Zi − E[Z])) θbc∗ = : n There is a problem with this, however, as we usually do not know Cov(Y; Z). We overcome this problem by doing p pilot simulations and setting Pp j=1(Yj − Y p)(Zj − E[Z]) Cov(d Y; Z) = : p − 1 If it is also the case that Var(Z) is unknown, then we also estimate it with Pp 2 j=1(Zj − E[Z]) Var(d Z) = p − 1 and finally set ∗ Cov(d Y; Z) bc = − : Var(d Z) Assuming we can find a control variate, our control variate simulation algorithm is as follows. Note that the Vi's are IID, so we can compute approximate confidence intervals as before. Simulation Efficiency and an Introduction to Variance Reduction Methods 4 Control Variate Simulation Algorithm for Estimating E[Y ] =∗ Do pilot simulation first ∗= for i = 1 to p generate (Yi;Zi) end for ∗ compute bc =∗ Now do main simulation ∗= for i = 1 to n generate (Yi;Zi) ∗ set Vi = Yi + bc (Zi − E[Z]) end for Pn set θ ∗ = V = V =n bbc n i=1 i 2 P 2 set σ = (V − θ ∗ ) =(n − 1) bn;v i bbc h σn;v σn;v i set 100(1 − α)% CI = θ ∗ − z bp ; θ ∗ + z bp bbc 1−α/2 n bbc 1−α/2 n Example 1 2 Suppose we wish to estimate θ = E[e(U+W ) ] where U; W ∼ U(0; 1) and IID. In our notation we then have 2 Y := e(U+W ) . The usual approach is: 1. Generate U1;:::;Un and W1;:::;Wn, all IID ∼ U(0; 1) 2 2 (U1+W1) (Un+Wn) 2. Compute Y1 = e ;:::;Yn = e Pn 3. Construct the estimator θbn;y = j=1 Yj=n p 2 4. Build confidence intervals θbn;y ± z1−α/2 σbn;y= n where σbn;y is the usual estimate of Var(Y ). Now consider using the control variate technique. First we have to choose an appropriate control variate, Z. There are many possibilities including Z1 := U + W 2 Z2 := (U + W ) U+W Z3 := e Note that we can easily compute E[Zi] for i = 1; 2; 3 and that it's also clear that Cov(Y; Zi) 6= 0. In a simple ∗ experiment we used Z3, estimating bc on the basis of a pilot simulation with 100 samples.
Load more

Recommended publications
  • Kalman and Particle Filtering
    Abstract: The Kalman and Particle filters are algorithms that recursively update an estimate of the state and find the innovations driving a stochastic process given a sequence of observations. The Kalman filter accomplishes this goal by linear projections, while the Particle filter does so by a sequential Monte Carlo method. With the state estimates, we can forecast and smooth the stochastic process. With the innovations, we can estimate the parameters of the model. The article discusses how to set a dynamic model in a state-space form, derives the Kalman and Particle filters, and explains how to use them for estimation. Kalman and Particle Filtering The Kalman and Particle filters are algorithms that recursively update an estimate of the state and find the innovations driving a stochastic process given a sequence of observations. The Kalman filter accomplishes this goal by linear projections, while the Particle filter does so by a sequential Monte Carlo method. Since both filters start with a state-space representation of the stochastic processes of interest, section 1 presents the state-space form of a dynamic model. Then, section 2 intro- duces the Kalman filter and section 3 develops the Particle filter. For extended expositions of this material, see Doucet, de Freitas, and Gordon (2001), Durbin and Koopman (2001), and Ljungqvist and Sargent (2004). 1. The state-space representation of a dynamic model A large class of dynamic models can be represented by a state-space form: Xt+1 = ϕ (Xt,Wt+1; γ) (1) Yt = g (Xt,Vt; γ) . (2) This representation handles a stochastic process by finding three objects: a vector that l describes the position of the system (a state, Xt X R ) and two functions, one mapping ∈ ⊂ 1 the state today into the state tomorrow (the transition equation, (1)) and one mapping the state into observables, Yt (the measurement equation, (2)).
    [Show full text]
  • A Fourier-Wavelet Monte Carlo Method for Fractal Random Fields
    JOURNAL OF COMPUTATIONAL PHYSICS 132, 384±408 (1997) ARTICLE NO. CP965647 A Fourier±Wavelet Monte Carlo Method for Fractal Random Fields Frank W. Elliott Jr., David J. Horntrop, and Andrew J. Majda Courant Institute of Mathematical Sciences, 251 Mercer Street, New York, New York 10012 Received August 2, 1996; revised December 23, 1996 2 2H k[v(x) 2 v(y)] l 5 CHux 2 yu , (1.1) A new hierarchical method for the Monte Carlo simulation of random ®elds called the Fourier±wavelet method is developed and where 0 , H , 1 is the Hurst exponent and k?l denotes applied to isotropic Gaussian random ®elds with power law spectral the expected value. density functions. This technique is based upon the orthogonal Here we develop a new Monte Carlo method based upon decomposition of the Fourier stochastic integral representation of the ®eld using wavelets. The Meyer wavelet is used here because a wavelet expansion of the Fourier space representation of its rapid decay properties allow for a very compact representation the fractal random ®elds in (1.1). This method is capable of the ®eld. The Fourier±wavelet method is shown to be straightfor- of generating a velocity ®eld with the Kolmogoroff spec- ward to implement, given the nature of the necessary precomputa- trum (H 5 Ad in (1.1)) over many (10 to 15) decades of tions and the run-time calculations, and yields comparable results scaling behavior comparable to the physical space multi- with scaling behavior over as many decades as the physical space multiwavelet methods developed recently by two of the authors.
    [Show full text]
  • Fourier, Wavelet and Monte Carlo Methods in Computational Finance
    Fourier, Wavelet and Monte Carlo Methods in Computational Finance Kees Oosterlee1;2 1CWI, Amsterdam 2Delft University of Technology, the Netherlands AANMPDE-9-16, 7/7/2016 Kees Oosterlee (CWI, TU Delft) Comp. Finance AANMPDE-9-16 1 / 51 Joint work with Fang Fang, Marjon Ruijter, Luis Ortiz, Shashi Jain, Alvaro Leitao, Fei Cong, Qian Feng Agenda Derivatives pricing, Feynman-Kac Theorem Fourier methods Basics of COS method; Basics of SWIFT method; Options with early-exercise features COS method for Bermudan options Monte Carlo method BSDEs, BCOS method (very briefly) Kees Oosterlee (CWI, TU Delft) Comp. Finance AANMPDE-9-16 1 / 51 Agenda Derivatives pricing, Feynman-Kac Theorem Fourier methods Basics of COS method; Basics of SWIFT method; Options with early-exercise features COS method for Bermudan options Monte Carlo method BSDEs, BCOS method (very briefly) Joint work with Fang Fang, Marjon Ruijter, Luis Ortiz, Shashi Jain, Alvaro Leitao, Fei Cong, Qian Feng Kees Oosterlee (CWI, TU Delft) Comp. Finance AANMPDE-9-16 1 / 51 Feynman-Kac theorem: Z T v(t; x) = E g(s; Xs )ds + h(XT ) ; t where Xs is the solution to the FSDE dXs = µ(Xs )ds + σ(Xs )d!s ; Xt = x: Feynman-Kac Theorem The linear partial differential equation: @v(t; x) + Lv(t; x) + g(t; x) = 0; v(T ; x) = h(x); @t with operator 1 Lv(t; x) = µ(x)Dv(t; x) + σ2(x)D2v(t; x): 2 Kees Oosterlee (CWI, TU Delft) Comp. Finance AANMPDE-9-16 2 / 51 Feynman-Kac Theorem The linear partial differential equation: @v(t; x) + Lv(t; x) + g(t; x) = 0; v(T ; x) = h(x); @t with operator 1 Lv(t; x) = µ(x)Dv(t; x) + σ2(x)D2v(t; x): 2 Feynman-Kac theorem: Z T v(t; x) = E g(s; Xs )ds + h(XT ) ; t where Xs is the solution to the FSDE dXs = µ(Xs )ds + σ(Xs )d!s ; Xt = x: Kees Oosterlee (CWI, TU Delft) Comp.
    [Show full text]
  • Efficient Monte Carlo Methods for Estimating Failure Probabilities
    Reliability Engineering and System Safety 165 (2017) 376–394 Contents lists available at ScienceDirect Reliability Engineering and System Safety journal homepage: www.elsevier.com/locate/ress ffi E cient Monte Carlo methods for estimating failure probabilities MARK ⁎ Andres Albana, Hardik A. Darjia,b, Atsuki Imamurac, Marvin K. Nakayamac, a Mathematical Sciences Dept., New Jersey Institute of Technology, Newark, NJ 07102, USA b Mechanical Engineering Dept., New Jersey Institute of Technology, Newark, NJ 07102, USA c Computer Science Dept., New Jersey Institute of Technology, Newark, NJ 07102, USA ARTICLE INFO ABSTRACT Keywords: We develop efficient Monte Carlo methods for estimating the failure probability of a system. An example of the Probabilistic safety assessment problem comes from an approach for probabilistic safety assessment of nuclear power plants known as risk- Risk analysis informed safety-margin characterization, but it also arises in other contexts, e.g., structural reliability, Structural reliability catastrophe modeling, and finance. We estimate the failure probability using different combinations of Uncertainty simulation methodologies, including stratified sampling (SS), (replicated) Latin hypercube sampling (LHS), Monte Carlo and conditional Monte Carlo (CMC). We prove theorems establishing that the combination SS+LHS (resp., SS Variance reduction Confidence intervals +CMC+LHS) has smaller asymptotic variance than SS (resp., SS+LHS). We also devise asymptotically valid (as Nuclear regulation the overall sample size grows large) upper confidence bounds for the failure probability for the methods Risk-informed safety-margin characterization considered. The confidence bounds may be employed to perform an asymptotically valid probabilistic safety assessment. We present numerical results demonstrating that the combination SS+CMC+LHS can result in substantial variance reductions compared to stratified sampling alone.
    [Show full text]
  • Basic Statistics and Monte-Carlo Method -2
    Applied Statistical Mechanics Lecture Note - 10 Basic Statistics and Monte-Carlo Method -2 고려대학교 화공생명공학과 강정원 Table of Contents 1. General Monte Carlo Method 2. Variance Reduction Techniques 3. Metropolis Monte Carlo Simulation 1.1 Introduction Monte Carlo Method Any method that uses random numbers Random sampling the population Application • Science and engineering • Management and finance For given subject, various techniques and error analysis will be presented Subject : evaluation of definite integral b I = ρ(x)dx a 1.1 Introduction Monte Carlo method can be used to compute integral of any dimension d (d-fold integrals) Error comparison of d-fold integrals Simpson’s rule,… E ∝ N −1/ d − Monte Carlo method E ∝ N 1/ 2 purely statistical, not rely on the dimension ! Monte Carlo method WINS, when d >> 3 1.2 Hit-or-Miss Method Evaluation of a definite integral b I = ρ(x)dx a h X X X ≥ ρ X h (x) for any x X Probability that a random point reside inside X O the area O O I N' O O r = ≈ O O (b − a)h N a b N : Total number of points N’ : points that reside inside the region N' I ≈ (b − a)h N 1.2 Hit-or-Miss Method Start Set N : large integer N’ = 0 h X X X X X Choose a point x in [a,b] = − + X Loop x (b a)u1 a O N times O O y = hu O O Choose a point y in [0,h] 2 O O a b if [x,y] reside inside then N’ = N’+1 I = (b-a) h (N’/N) End 1.2 Hit-or-Miss Method Error Analysis of the Hit-or-Miss Method It is important to know how accurate the result of simulations are The rule of 3σ’s Identifying Random Variable N = 1 X X n N n=1 From
    [Show full text]
  • A Tutorial on Quantile Estimation Via Monte Carlo
    A Tutorial on Quantile Estimation via Monte Carlo Hui Dong and Marvin K. Nakayama Abstract Quantiles are frequently used to assess risk in a wide spectrum of applica- tion areas, such as finance, nuclear engineering, and service industries. This tutorial discusses Monte Carlo simulation methods for estimating a quantile, also known as a percentile or value-at-risk, where p of a distribution’s mass lies below its p-quantile. We describe a general approach that is often followed to construct quantile estimators, and show how it applies when employing naive Monte Carlo or variance-reduction techniques. We review some large-sample properties of quantile estimators. We also describe procedures for building a confidence interval for a quantile, which provides a measure of the sampling error. 1 Introduction Numerous application settings have adopted quantiles as a way of measuring risk. For a fixed constant 0 < p < 1, the p-quantile of a continuous random variable is a constant x such that p of the distribution’s mass lies below x. For example, the median is the 0:5-quantile. In finance, a quantile is called a value-at-risk, and risk managers commonly employ p-quantiles for p ≈ 1 (e.g., p = 0:99 or p = 0:999) to help determine capital levels needed to be able to cover future large losses with high probability; e.g., see [33]. Nuclear engineers use 0:95-quantiles in probabilistic safety assessments (PSAs) of nuclear power plants. PSAs are often performed with Monte Carlo, and the U.S. Nuclear Regulatory Commission (NRC) further requires that a PSA accounts for the Hui Dong Amazon.com Corporate LLC∗, Seattle, WA 98109, USA e-mail: [email protected] ∗This work is not related to Amazon, regardless of the affiliation.
    [Show full text]
  • Two-Dimensional Monte Carlo Filter for a Non-Gaussian Environment
    electronics Article Two-Dimensional Monte Carlo Filter for a Non-Gaussian Environment Xingzi Qiang 1 , Rui Xue 1,* and Yanbo Zhu 2 1 School of Electrical and Information Engineering, Beihang University, Beijing 100191, China; [email protected] 2 Aviation Data Communication Corporation, Beijing 100191, China; [email protected] * Correspondence: [email protected] Abstract: In a non-Gaussian environment, the accuracy of a Kalman filter might be reduced. In this paper, a two- dimensional Monte Carlo Filter is proposed to overcome the challenge of the non-Gaussian environment for filtering. The two-dimensional Monte Carlo (TMC) method is first proposed to improve the efficacy of the sampling. Then, the TMC filter (TMCF) algorithm is proposed to solve the non-Gaussian filter problem based on the TMC. In the TMCF, particles are deployed in the confidence interval uniformly in terms of the sampling interval, and their weights are calculated based on Bayesian inference. Then, the posterior distribution is described more accurately with less particles and their weights. Different from the PF, the TMCF completes the transfer of the distribution using a series of calculations of weights and uses particles to occupy the state space in the confidence interval. Numerical simulations demonstrated that, the accuracy of the TMCF approximates the Kalman filter (KF) (the error is about 10−6) in a two-dimensional linear/ Gaussian environment. In a two-dimensional linear/non-Gaussian system, the accuracy of the TMCF is improved by 0.01, and the computation time reduced to 0.067 s from 0.20 s, compared with the particle filter.
    [Show full text]
  • The Monte Carlo Method
    The Monte Carlo Method Introduction Let S denote a set of numbers or vectors, and let real-valued function g(x) be defined over S. There are essentially three fundamental computational problems associated with S and g. R Integral Evaluation Evaluate S g(x)dx. Note that if S is discrete, then integration can be replaced by summation. Optimization Find x0 2 S that minimizes g over S. In other words, find x0 2 S such that, for all x 2 S, g(x0) ≤ g(x). Mixed Optimization and Integration If g is defined over the space S × Θ, where Θ is a param- R eter space, then the problem is to determine θ 2 Θ for which S g(x; θ)dx is a minimum. The mathematical disciplines of real analysis (e.g. calculus), functional analysis, and combinatorial optimization offer deterministic algorithms for solving these problems (by solving we mean finding an exact solution or an approximate solution) for special instances of S and g. For example, if S is a closed interval of numbers [a; b] and g is a polynomial, then Z Z b g(x)dx = g(x)dx = G(b) − G(a); S a where G is an antiderivative of g. As another example, if G = (V; E; w) is a connected weighted simple graph, S is the set of all spanning trees of G, and g(x) denotes the sum of all the weights on the edges of spanning tree x, then Prim's algorithm may be used to find a spanning tree of G that minimizes g.
    [Show full text]
  • Fundamentals of the Monte Carlo Method for Neutral and Charged Particle Transport
    Fundamentals of the Monte Carlo method for neutral and charged particle transport Alex F Bielajew The University of Michigan Department of Nuclear Engineering and Radiological Sciences 2927 Cooley Building (North Campus) 2355 Bonisteel Boulevard Ann Arbor, Michigan 48109-2104 U. S. A. Tel: 734 764 6364 Fax: 734 763 4540 email: [email protected] c 1998—2020 Alex F Bielajew c 1998—2020 The University of Michigan May 31, 2020 2 Preface This book arises out of a course I am teaching for a two-credit (26 hour) graduate-level course Monte Carlo Methods being taught at the Department of Nuclear Engineering and Radiological Sciences at the University of Michigan. AFB, May 31, 2020 i ii Contents 1 What is the Monte Carlo method? 1 1.1 WhyisMonteCarlo?............................... 7 1.2 Somehistory ................................... 11 2 Elementary probability theory 15 2.1 Continuousrandomvariables .......................... 15 2.1.1 One-dimensional probability distributions . 15 2.1.2 Two-dimensional probability distributions . 24 2.1.3 Cumulative probability distributions . 27 2.2 Discreterandomvariables ............................ 27 3 Random Number Generation 31 3.1 Linear congruential random number generators. ...... 32 3.2 Long sequence random number generators . .... 36 4 Sampling Theory 41 4.1 Invertible cumulative distribution functions (direct method) . ...... 42 4.2 Rejectionmethod................................. 46 4.3 Mixedmethods .................................. 49 4.4 Examples of sampling techniques . 50 4.4.1 Circularly collimated parallel beam . 50 4.4.2 Point source collimated to a planar circle . 52 4.4.3 Mixedmethodexample.......................... 53 iii iv CONTENTS 4.4.4 Multi-dimensional example . 55 5 Error estimation 59 5.1 Directerrorestimation .............................. 62 5.2 Batch statistics error estimation .
    [Show full text]
  • Monte Carlo Method - Wikipedia
    2. 11. 2019 Monte Carlo method - Wikipedia Monte Carlo method Monte Carlo methods, or Monte Carlo experiments, are a broad class of computational algorithms that rely on repeated random sampling to obtain numerical results. The underlying concept is to use randomness to solve problems that might be deterministic in principle. They are often used in physical and mathematical problems and are most useful when it is difficult or impossible to use other approaches. Monte Carlo methods are mainly used in three problem classes:[1] optimization, numerical integration, and generating draws from a probability distribution. In physics-related problems, Monte Carlo methods are useful for simulating systems with many coupled degrees of freedom, such as fluids, disordered materials, strongly coupled solids, and cellular structures (see cellular Potts model, interacting particle systems, McKean–Vlasov processes, kinetic models of gases). Other examples include modeling phenomena with significant uncertainty in inputs such as the calculation of risk in business and, in mathematics, evaluation of multidimensional definite integrals with complicated boundary conditions. In application to systems engineering problems (space, oil exploration, aircraft design, etc.), Monte Carlo–based predictions of failure, cost overruns and schedule overruns are routinely better than human intuition or alternative "soft" methods.[2] In principle, Monte Carlo methods can be used to solve any problem having a probabilistic interpretation. By the law of large numbers, integrals described by the expected value of some random variable can be approximated by taking the empirical mean (a.k.a. the sample mean) of independent samples of the variable. When the probability distribution of the variable is parametrized, mathematicians often use a Markov chain Monte Carlo (MCMC) sampler.[3][4][5][6] The central idea is to design a judicious Markov chain model with a prescribed stationary probability distribution.
    [Show full text]
  • (MC) Simulation for System Reliability
    Monte Carlo (MC) simulation for system reliability By Fares Innal RAMS Group Department of Production and Quality Engineering NTNU Lecture plan 1. Motivation: MC simulation is a necessary method for complexe systems reliability analysis. 2. MC simulation principle 3. Random number generation (RNG) 4. Probability distributions simulation 5. Simulation realization (History) 6. Output analysis and data accuracy 7. Example 8. MC simulation and uncertainty propagation 2 2 1. Motivation: MC simulation is a necessity Analytical approaches become impractical: Complex systems • Approximated representation that does • High system states number not fit to the real system • Non constant failure (component • Extensive time for the aging) and repair rates development of the • Components dependency: standby, analytical model ... • Infeasible • Complex maintenance strategies: spare parts, priority, limited resources,… • Multi-phase systems (MPS) Simulation is required: a common • Multi-state systems (MSS) paradigm and a powerful tool for • Reconfigurable systems analyzing complex systems, due to • … its capability of achieving a closer adherence to reality. It provides a simplified representation of the system under study. 3 3 1. Motivation: example Analytical approaches Markov chains λC2 C1 Fault tree λ Only one repair man C1 C2* C1 (1) C2 Non constant repair S is available with FIFO μ rates (e.g. lognormal) repair strategy C1 μ C1* C1 C2* μC2 μ C1 C1 C2 C2 C2 (1) • Markov chains λC2 C1* become impractical. C2 • Strong complications for other analytical λC1 approaches MC simulation 4 4 2. MC simulation principle : definitions MC simulation may be defined as a process for obtaining estimates (numeric values) for a given system (guided by a prescribed set of goals) by means of random numbers.
    [Show full text]
  • Applications of Monte Carlo Methods in Statistical Inference Using Regression Analysis Ji Young Huh Claremont Mckenna College
    Claremont Colleges Scholarship @ Claremont CMC Senior Theses CMC Student Scholarship 2015 Applications of Monte Carlo Methods in Statistical Inference Using Regression Analysis Ji Young Huh Claremont McKenna College Recommended Citation Huh, Ji Young, "Applications of Monte Carlo Methods in Statistical Inference Using Regression Analysis" (2015). CMC Senior Theses. Paper 1160. http://scholarship.claremont.edu/cmc_theses/1160 This Open Access Senior Thesis is brought to you by Scholarship@Claremont. It has been accepted for inclusion in this collection by an authorized administrator. For more information, please contact [email protected]. CLAREMONT MCKENNA COLLEGE Applications of Monte Carlo Methods in Statistical Inference Using Regression Analysis SUBMITTED TO Professor Manfred Werner Keil AND Professor Mark Huber AND Dean Nicholas Warner BY Ji Young Huh for SENIOR THESIS Spring 2015 April 27, 2015 ABSTRACT This paper studies the use of Monte Carlo simulation techniques in the field of econometrics, specifically statistical inference. First, I examine several estimators by deriving properties explicitly and generate their distributions through simulations. Here, simulations are used to illustrate and support the analytical results. Then, I look at test statistics where derivations are costly because of the sensitivity of their critical values to the data generating processes. Simulations here establish significance and necessity for drawing statistical inference. Overall, the paper examines when and how simulations are needed in studying econometric theories. ACKNOWLEDGEMENTS This thesis has a special meaning to me as the first product of my independent academic endeavor that I particularly felt passionate about. I feel very fortunate to have had such a valuable opportunity in my undergraduate career.
    [Show full text]