Discrete Approximations of Probability Distributions
AbstractPractical limits on the size of most probabilistic models require that probability distributions be approximated by a few representative values and associated probabilities. This paper demonstrates that methods commonly used to determine discrete approximations of probability distributions systematically underestimate the moments of the original distribution. A new procedure based on gaussian quadrature is developed in this paper. It can be used to decrease the error in the approximation to any desired level.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 29 (1983)
Issue (Month): 3 (March)
decision analysis; approximations; approximate probability distributions;
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