In this paper we use splitting technique to estimate the probability of hitting a rare but critical set by the continuous component of a switching diffusion. Instead of following classical approach we use Wonham filter to achieve multiple goals including reduction of asymptotic variance and exemption from sampling the discrete components.
We consider a linear stochastic fluid network under Markov modulation, with a focus on the probability that the joint storage level attains a value in a rare set at a given point in time. The main objective is to develop efficient importance sampling
algorithms with provable performance guarantees. For linear stochastic fluid networks without modulation, we prove that the number of runs needed (so as to obtain an estimate with a given precision) increases polynomially (whereas the probability under consideration decays essentially exponentially); for networks operating in the slow modulation regime, our algorithm is asymptotically efficient. Our techniques are in the tradition of the rare-event simulation procedures that were developed for the sample-mean of i.i.d. one-dimensional light-tailed random variables, and intensively use the idea of exponential twisting. In passing, we also point out how to set up a recursion to evaluate the (transient and stationary) moments of the joint storage level in Markov-modulated linear stochastic fluid networks.
In this paper we address the problem of rare-event simulation for heavy-tailed Levy processes with infinite activities. We propose a strongly efficient importance sampling algorithm that builds upon the sample path large deviations for heavy-tailed L
evy processes, stick-breaking approximation of extrema of Levy processes, and the randomized debiasing Monte Carlo scheme. The proposed importance sampling algorithm can be applied to a broad class of Levy processes and exhibits significant improvements in efficiency when compared to crude Monte-Carlo method in our numerical experiments.
This work develops asymptotic properties of a class of switching jump diffusion processes. The processes under consideration may be viewed as a number of jump diffusion processes modulated by a random switching mechanism. The underlying processes fea
ture in the switching process depends on the jump diffusions. In this paper, conditions for recurrence and positive recurrence are derived. Ergodicity is examined in detail. Existence of invariant probability measures is proved.
The Cross Entropy method is a well-known adaptive importance sampling method for rare-event probability estimation, which requires estimating an optimal importance sampling density within a parametric class. In this article we estimate an optimal imp
ortance sampling density within a wider semiparametric class of distributions. We show that this semiparametric version of the Cross Entropy method frequently yields efficient estimators. We illustrate the excellent practical performance of the method with numerical experiments and show that for the problems we consider it typically outperforms alternative schemes by orders of magnitude.
This work examines a class of switching jump diffusion processes. The main effort is devoted to proving the maximum principle and obtaining the Harnack inequalities. Compared with the diffusions and switching diffusions, the associated operators for
switching jump diffusions are non-local, resulting in more difficulty in treating such systems. Our study is carried out by taking into consideration of the interplay of stochastic processes and the associated systems of integro-differential equations.