Abstract
The key issue in importance sampling is the choice of the alternative sampling distribution, which is often chosen from the exponential tilt family of the underlying distribution. However, when the problem exhibits certain kind of nonconvexity, it is very likely that a single exponential change of measure will never attain asymptotic optimality and can lead to erroneous estimates. In this paper we introduce an explicit iterative scheme which combines the traditional cross-entropy method and the EM algorithm to find an efficient alternative sampling distribution in the form of mixtures. We also study the applications of this scheme to the estimation of rainbow option prices.
Connections
Explore this paper’s authors, topics and related work.
Building this map preview
BZPEER is loading the nearby papers, people, topics and institutions for this page.
Reviews 0
Write a review
No reviews yet.
Discussion 0
Add a comment
No comments yet.