Efficient Importance Sampling for Large Sums of Independent and Identically Distributed Random Variables

TL;DR

This paper proposes an alternative importance sampling method for estimating small probabilities of sums of i.i.d. nonnegative random variables, outperforming exponential twisting in certain distribution classes especially for large sums or rare events.

Contribution

It introduces a Gamma importance sampling PDF that matches exponential twisting performance for polynomial-like distributions and outperforms it for log-normal distributions in rare event regimes.

Findings

Gamma IS PDF performs comparably to exponential twisting for polynomial-like distributions.

Gamma IS PDF outperforms exponential twisting for log-normal distributions.

Numerical experiments confirm high accuracy of the proposed estimator in large sum and rare event regimes.

Abstract

We discuss estimating the probability that the sum of nonnegative independent and identically distributed random variables falls below a given threshold, i.e., $\mathbb{P}(\sum_{i=1}^{N}{X_i} \leq \gamma)$, via importance sampling (IS). We are particularly interested in the rare event regime when $N$ is large and/or $\gamma$ is small. The exponential twisting is a popular technique for similar problems that, in most cases, compares favorably to other estimators. However, it has some limitations: i) it assumes the knowledge of the moment generating function of $X_i$ and ii) sampling under the new IS PDF is not straightforward and might be expensive. The aim of this work is to propose an alternative IS PDF that approximately yields, for certain classes of distributions and in the rare event regime, at least the same performance as the exponential twisting technique and, at the same time, does not introduce serious limitations. The first class includes distributions whose probability density functions (PDFs) are asymptotically equivalent, as $x \rightarrow 0$, to $bx^{p}$, for $p>-1$ and $b>0$. For this class of distributions, the Gamma IS PDF with appropriately chosen parameters retrieves approximately, in the rare event regime corresponding to small values of $\gamma$ and/or large values of $N$, the same performance of the estimator based on the use of the exponential twisting technique. In the second class, we consider the Log-normal setting, whose PDF at zero vanishes faster than any polynomial, and we show numerically that a Gamma IS PDF with optimized parameters clearly outperforms the exponential twisting IS PDF. Numerical experiments validate the efficiency of the proposed estimator in delivering a highly accurate estimate in the regime of large $N$ and/or small $\gamma$.