Sensitivity analysis for simulations via likelihood ratios

Sensitivity analysis for simulations via likelihood ratios

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Article ID: iaor1990328
Country: United States
Volume: 37
Issue: 5
Start Page Number: 830
End Page Number: 835
Publication Date: Sep 1989
Journal: Operations Research
Authors: ,
Abstract:

The authors present a simple method of estimating the sensitivity of quantities obtained from simulation with respect to a class of parameters. Here sensitivity means the derivative of an expectation with respect to a parameter. The class of parameters includes, for example, Poisson rates, discrete probabilities, and the mean and variance of a Normal distribution. The method is extremely well suited to regenerative simulation, and can be implemented on extant simulations with little effort, increase in running time, or memory requirements. It is based on some change-of-measure formulas derived from likelihood ratios. In addition to the theorems that underly the technique, the authors present some numerical examples.

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