Assaf Zeevi

On the inefficiency of state-independent importance sampling in the presence of heavy tails

Coauthor(s): Achal Bassamboo, Sandeep Juneja.

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Abstract:
We consider importance sampling simulation for estimating rare event probabilities in the presence of heavy-tailed distributions that have polynomial-like tails. In particular, we prove the following negative result: there does not exist an asymptotically optimal state-independent change-of-measure for estimating the probability that a random walk (respectively, queue length for a single server queue) exceeds a "high" threshold before going below zero (respectively, becoming empty). Furthermore, we derive explicit bounds on the best asymptotic variance reduction achieved by state-independent importance sampling relative to naive simulation. We illustrate through a simple numerical example that a "good" state-dependent change-of-measure may be developed based on an approximation of the zero-variance measure.

Source: Operations Research Letters
Exact Citation:
Bassamboo, Achal, Sandeep Juneja, and Assaf Zeevi. "On the inefficiency of state-independent importance sampling in the presence of heavy tails." Operations Research Letters 35, no. 2 (March 2007): 251-260.
Volume: 35
Number: 2
Pages: 251-260
Date: 3 2007