Quantiles, which are also known as values-at-risk in finance, frequently arise in practice as measures of risk. This article develops asymptotically valid confidence intervals for quantiles estimated via simulation using variance-reduction techniques (VRTs). We establish our results within a general framework for VRTs, which we show includes importance sampling, stratified sampling, antithetic variates, and control variates. Our method for verifying asymptotic validity is to first demonstrate that a quantile estimator obtained via a VRT within our framework satisfies a Bahadur-Ghosh representation. We then exploit this to show that the quantile estimator obeys a central limit theorem (CLT) and to develop a consistent estimator for the variance constant appearing in the CLT, which enables us to construct a confidence interval. We provide explicit formulae for the estimators for each of the VRTs considered.
We establish a necessary condition for any importance sampling scheme to give bounded relative error when estimating a performance measure of a highly reliable Markovian system. Also, a class of importance sampling methods is defined for which we prove a necessary and sufficient condition for bounded relative error for the performance measure estimator. This class of probability measures includes all of the currently existing failure biasing methods in the literature. Similar conditions for derivative estimators are established.
His research interests include performance and reliability modeling, fault-tolerance, queuing theory, (rare event) simulation methodology, with applications to computer systems and telecommunication networks.
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