On efficient simulation in dynamic models
AbstractWays of improving the efficiency of Monte-Carlo (MC) techniques are studied for dynamic models. Such models cause the conventional Antithetic Variate (AV) technique to fail, and will be proved to reduce the benefit from using Control Variates with nearly nonstationary series. This paper suggests modifications of the two conventional variance reduction techniques to enhance their efficiency. New classes of AVs are also proposed. Methods of reordering innovations are found to do less well than others which rely on changing some signs in the spirit of the traditional AV. Numerical and analytical calculations are given to investigate the features of the proposed techniques. JEL classification code: C15 Key words: Dynamic models, Monte-Carlo (MC), Variance Reduction Technique (VRT), Antithetic Variate (AV), Control Variate (CV), Efficiency Gain (EG), Response Surface (RS).
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Bibliographic InfoPaper provided by Department of Economics, University of Insubria in its series Economics and Quantitative Methods with number qf0709.
Length: 27 pages
Date of creation: Feb 2008
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- C00 - Mathematical and Quantitative Methods - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-06 (All new papers)
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- Johannes Jahn & Rüdiger Rauh, 1997. "Contingent epiderivatives and set-valued optimization," Computational Statistics, Springer, vol. 46(2), pages 193-211, June.
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