On the inefficiency of state-independent importance sampling in the presence of heavy tails
Coauthor(s): Achal Bassamboo, Sandeep Juneja.
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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
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.