Article ID: | iaor20104019 |
Volume: | 58 |
Issue: | 2 |
Start Page Number: | 357 |
End Page Number: | 370 |
Publication Date: | Mar 2010 |
Journal: | Operations Research |
Authors: | Hong L Jeff, Liu Guangwu |
Keywords: | simulation: analysis |
A probability is the expectation of an indicator function. However, the standard pathwise sensitivity estimation approach, which interchanges the differentiation and expectation, cannot be directly applied because the indicator function is discontinuous. In this paper, we design a pathwise sensitivity estimator for probability functions based on a result of Hong (2009). We show that the estimator is consistent and follows a central limit theorem for simulation outputs from both terminating and steady-state simulations, and the optimal rate of convergence of the estimator is