Efficient Nested Simulation Experiment Design via the Likelihood Ratio Method
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arXiv
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| Format: | Preprint |
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2020
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| _version_ | 1866913346748416000 |
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| author | Feng, Mingbin Ben Song, Eunhye |
| author_facet | Feng, Mingbin Ben Song, Eunhye |
| contents | In nested simulation literature, a common assumption is that the experimenter can choose the number of outer scenarios to sample. This paper considers the case when the experimenter is given a fixed set of outer scenarios from an external entity. We propose a nested simulation experiment design that pools inner replications from one scenario to estimate another scenario's conditional mean via the likelihood ratio method. Given the outer scenarios, we decide how many inner replications to run at each outer scenario as well as how to pool the inner replications by solving a bi-level optimization problem that minimizes the total simulation effort. We provide asymptotic analyses on the convergence rates of the performance measure estimators computed from the optimized experiment design. Under some assumptions, the optimized design achieves $\cO(Γ^{-1})$ mean squared error of the estimators given simulation budget $Γ$. Numerical experiments demonstrate that our design outperforms a state-of-the-art design that pools replications via regression. |
| format | Preprint |
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arxiv_https___arxiv_org_abs_2008_13087 |
| institution | arXiv |
| publishDate | 2020 |
| record_format | arxiv |
| spellingShingle | Efficient Nested Simulation Experiment Design via the Likelihood Ratio Method Feng, Mingbin Ben Song, Eunhye Methodology Risk Management In nested simulation literature, a common assumption is that the experimenter can choose the number of outer scenarios to sample. This paper considers the case when the experimenter is given a fixed set of outer scenarios from an external entity. We propose a nested simulation experiment design that pools inner replications from one scenario to estimate another scenario's conditional mean via the likelihood ratio method. Given the outer scenarios, we decide how many inner replications to run at each outer scenario as well as how to pool the inner replications by solving a bi-level optimization problem that minimizes the total simulation effort. We provide asymptotic analyses on the convergence rates of the performance measure estimators computed from the optimized experiment design. Under some assumptions, the optimized design achieves $\cO(Γ^{-1})$ mean squared error of the estimators given simulation budget $Γ$. Numerical experiments demonstrate that our design outperforms a state-of-the-art design that pools replications via regression. |
| title | Efficient Nested Simulation Experiment Design via the Likelihood Ratio Method |
| topic | Methodology Risk Management |
| url | https://arxiv.org/abs/2008.13087 |