Technical Note- Bootstrap-based Budget Allocation for Nested Simulation

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

2 Scopus Citations
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Detail(s)

Original languageEnglish
Pages (from-to)1128-1142
Journal / PublicationOperations Research
Volume70
Issue number2
Online published23 Feb 2021
Publication statusPublished - Mar 2022

Abstract

Simulation budget allocation is at the heart of a nested (also referred to as two-level) simulation approach to estimating functionals of a conditional expectation. In this paper, we propose a sample-driven budget allocation rule under a unified nested simulation framework that allows for different forms of functionals. The proposed method employs bootstrap sampling to guide an effective choice of outer- and inner-level sample sizes. Furthermore, we establish a central limit theorem for nested simulation estimators, and incorporate the sample-driven allocation rule into the construction of asymptotically valid confidence intervals (CIs). Effectiveness of the sample-driven allocation rule and validity of the constructed CIs are confirmed by numerical experiments.

Research Area(s)

  • nested simulation, budget allocation, bootstrap sampling, confidence intervals