In many settings in which Monte Carlo methods are applied, there may be no known algorithm for exactly generating the random object for which an expectation is to be computed. Frequently, however, one can generate arbitrarily close approximations to the random object. We introduce a simple randomization idea for creating unbiased estimators in such a setting based on a sequence of approximations. Applying this idea to computing expectations of path functionals associated with stochastic differential equations (SDEs), we construct finite variance unbiased estimators with a "square root convergence rate" for a general class of multidimensional SDEs. We then identify the optimal randomization distribution. Numerical experiments with various path functionals of continuous-time processes that often arise in finance illustrate the effectiveness of our new approach.
We introduce a new class of Monte Carlo methods, which we call exact estimation algorithms.Such algorithms provide unbiased estimators for equilibrium expectations associated with realvalued functionals defined on a Markov chain. We provide easily implemented algorithms for the class of positive Harris recurrent Markov chains, and for chains that are contracting on average. We further argue that exact estimation in the Markov chain setting provides a significant theoretical relaxation relative to exact simulation methods.
In this paper, we introduce a new approach to constructing unbiased estimators when computing expectations of path functionals associated with stochastic differential equations (SDEs). Our randomization idea is closely related to multi-level Monte Carlo and provides a simple mechanism for constructing a finite variance unbiased estimator with "square root convergence rate" whenever one has available a scheme that produces strong error of order greater than 1/2 for the path functional under consideration.
We introduce a new class of Monte Carlo methods, which we call exact estimation algorithms.Such algorithms provide unbiased estimators for equilibrium expectations associated with realvalued functionals defined on a Markov chain. We provide easily implemented algorithms for the class of positive Harris recurrent Markov chains, and for chains that are contracting on average. We further argue that exact estimation in the Markov chain setting provides a significant theoretical relaxation relative to exact simulation methods.
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