Simulation And The Monte Carlo Method

This accessible new edition explores the major topics in Monte Carlo simulation that have arisen over the past 30 years and presents a sound foundation for problem solving Simulation and the Monte Carlo Method, Third Edition reflects the latest developments in the field and presents a fully updated and comprehensive account of the state-of-the-art theory, methods and applications that have emerged in Monte Carlo simulation since the publication of the classic First Edition over more than a quarter of a century ago. While maintaining its accessible and intuitive approach, this revised edition features a wealth of up-to-date information that facilitates a deeper understanding of problem solving across a wide array of subject areas, such as engineering, statistics, computer science, mathematics, and the physical and life sciences. The book begins with a modernized introduction that addresses the basic concepts of probability, Markov processes, and convex optimization. Subsequent chapters discuss the dramatic changes that have occurred in the field of the Monte Carlo method, with coverage of many modern topics including: Markov Chain Monte Carlo, variance reduction techniques such as importance (re-)sampling, and the transform likelihood ratio method, the score function method for sensitivity analysis, the stochastic approximation method and the stochastic counter-part method for Monte Carlo optimization, the cross-entropy method for rare events estimation and combinatorial optimization, and application of Monte Carlo techniques for counting problems. An extensive range of exercises is provided at the end of each chapter, as well as a generous sampling of applied examples. The Third Edition features a new chapter on the highly versatile splitting method, with applications to rare-event estimation, counting, sampling, and optimization. A second new chapter introduces the stochastic enumeration method, which is a new fast sequential Monte Carlo method for tree search. In addition, the Third Edition features new material on: • Random number generation, including multiple-recursive generators and the Mersenne Twister • Simulation of Gaussian processes, Brownian motion, and diffusion processes • Multilevel Monte Carlo method • New enhancements of the cross-entropy (CE) method, including the “improved” CE method, which uses sampling from the zero-variance distribution to find the optimal importance sampling parameters • Over 100 algorithms in modern pseudo code with flow control • Over 25 new exercises Simulation and the Monte Carlo Method, Third Edition is an excellent text for upper-undergraduate and beginning graduate courses in stochastic simulation and Monte Carlo techniques. The book also serves as a valuable reference for professionals who would like to achieve a more formal understanding of the Monte Carlo method. Reuven Y. Rubinstein, DSc, was Professor Emeritus in the Faculty of Industrial Engineering and Management at Technion-Israel Institute of Technology. He served as a consultant at numerous large-scale organizations, such as IBM, Motorola, and NEC. The author of over 100 articles and six books, Dr. Rubinstein was also the inventor of the popular score-function method in simulation analysis and generic cross-entropy methods for combinatorial optimization and counting. Dirk P. Kroese, PhD, is a Professor of Mathematics and Statistics in the School of Mathematics and Physics of The University of Queensland, Australia. He has published over 100 articles and four books in a wide range of areas in applied probability and statistics, including Monte Carlo methods, cross-entropy, randomized algorithms, tele-traffic c theory, reliability, computational statistics, applied probability, and stochastic modeling.

This accessible new edition explores the major topics in Monte Carlo simulation that have arisen over the past 30 years and presents a sound foundation for problem solving Simulation and the Monte Carlo Method, Third Edition reflects the latest developments in the field and presents a fully updated and comprehensive account of the state-of-the-art theory, methods and applications that have emerged in Monte Carlo simulation since the publication of the classic First Edition over more than a quarter of a century ago. While maintaining its accessible and intuitive approach, this revised edition features a wealth of up-to-date information that facilitates a deeper understanding of problem solving across a wide array of subject areas, such as engineering, statistics, computer science, mathematics, and the physical and life sciences. The book begins with a modernized introduction that addresses the basic concepts of probability, Markov processes, and convex optimization. Subsequent chapters discuss the dramatic changes that have occurred in the field of the Monte Carlo method, with coverage of many modern topics including: Markov Chain Monte Carlo, variance reduction techniques such as importance (re-)sampling, and the transform likelihood ratio method, the score function method for sensitivity analysis, the stochastic approximation method and the stochastic counter-part method for Monte Carlo optimization, the cross-entropy method for rare events estimation and combinatorial optimization, and application of Monte Carlo techniques for counting problems. An extensive range of exercises is provided at the end of each chapter, as well as a generous sampling of applied examples. The Third Edition features a new chapter on the highly versatile splitting method, with applications to rare-event estimation, counting, sampling, and optimization. A second new chapter introduces the stochastic enumeration method, which is a new fast sequential Monte Carlo method for tree search. In addition, the Third Edition features new material on: • Random number generation, including multiple-recursive generators and the Mersenne Twister • Simulation of Gaussian processes, Brownian motion, and diffusion processes • Multilevel Monte Carlo method • New enhancements of the cross-entropy (CE) method, including the “improved” CE method, which uses sampling from the zero-variance distribution to find the optimal importance sampling parameters • Over 100 algorithms in modern pseudo code with flow control • Over 25 new exercises Simulation and the Monte Carlo Method, Third Edition is an excellent text for upper-undergraduate and beginning graduate courses in stochastic simulation and Monte Carlo techniques. The book also serves as a valuable reference for professionals who would like to achieve a more formal understanding of the Monte Carlo method. Reuven Y. Rubinstein, DSc, was Professor Emeritus in the Faculty of Industrial Engineering and Management at Technion-Israel Institute of Technology. He served as a consultant at numerous large-scale organizations, such as IBM, Motorola, and NEC. The author of over 100 articles and six books, Dr. Rubinstein was also the inventor of the popular score-function method in simulation analysis and generic cross-entropy methods for combinatorial optimization and counting. Dirk P. Kroese, PhD, is a Professor of Mathematics and Statistics in the School of Mathematics and Physics of The University of Queensland, Australia. He has published over 100 articles and four books in a wide range of areas in applied probability and statistics, including Monte Carlo methods, cross-entropy, randomized algorithms, tele-traffic c theory, reliability, computational statistics, applied probability, and stochastic modeling.

Essentials of Monte Carlo Simulation focuses on the fundamentals of Monte Carlo methods using basic computer simulation techniques. The theories presented in this text deal with systems that are too complex to solve analytically. As a result, readers are given a system of interest and constructs using computer code, as well as algorithmic models to emulate how the system works internally. After the models are run several times, in a random sample way, the data for each output variable(s) of interest is analyzed by ordinary statistical methods. This book features 11 comprehensive chapters, and discusses such key topics as random number generators, multivariate random variates, and continuous random variates. Over 100 numerical examples are presented as part of the appendix to illustrate useful real world applications. The text also contains an easy to read presentation with minimal use of difficult mathematical concepts. Very little has been published in the area of computer Monte Carlo simulation methods, and this book will appeal to students and researchers in the fields of Mathematics and Statistics.

In various scientific and industrial fields, stochastic simulations are taking on a new importance. This is due to the increasing power of computers and practitioners’ aim to simulate more and more complex systems, and thus use random parameters as well as random noises to model the parametric uncertainties and the lack of knowledge on the physics of these systems. The error analysis of these computations is a highly complex mathematical undertaking. Approaching these issues, the authors present stochastic numerical methods and prove accurate convergence rate estimates in terms of their numerical parameters (number of simulations, time discretization steps). As a result, the book is a self-contained and rigorous study of the numerical methods within a theoretical framework. After briefly reviewing the basics, the authors first introduce fundamental notions in stochastic calculus and continuous-time martingale theory, then develop the analysis of pure-jump Markov processes, Poisson processes, and stochastic differential equations. In particular, they review the essential properties of Itô integrals and prove fundamental results on the probabilistic analysis of parabolic partial differential equations. These results in turn provide the basis for developing stochastic numerical methods, both from an algorithmic and theoretical point of view. The book combines advanced mathematical tools, theoretical analysis of stochastic numerical methods, and practical issues at a high level, so as to provide optimal results on the accuracy of Monte Carlo simulations of stochastic processes. It is intended for master and Ph.D. students in the field of stochastic processes and their numerical applications, as well as for physicists, biologists, economists and other professionals working with stochastic simulations, who will benefit from the ability to reliably estimate and control the accuracy of their simulations.

When learning very formal material one comes to a stage where one thinks one has understood the material. Confronted with a "realiife" problem, the passivity of this understanding sometimes becomes painfully elear. To be able to solve the problem, ideas, methods, etc. need to be ready at hand. They must be mastered (become active knowledge) in order to employ them successfully. Starting from this idea, the leitmotif, or aim, of this book has been to elose this gap as much as possible. How can this be done? The material presented here was born out of a series of lectures at the Summer School held at Figueira da Foz (Portugal) in 1987. The series of lectures was split into two concurrent parts. In one part the "formal material" was presented. Since the background of those attending varied widely, the presentation of the formal material was kept as pedagogic as possible. In the formal part the general ideas behind the Monte Carlo method were developed. The Monte Carlo method has now found widespread appli cation in many branches of science such as physics, chemistry, and biology. Because of this, the scope of the lectures had to be narrowed down. We could not give a complete account and restricted the treatment to the ap plication of the Monte Carlo method to the physics of phase transitions. Here particular emphasis is placed on finite-size effects.

In a probabilistic model, a rare event is an event with a very small probability of occurrence. The forecasting of rare events is a formidable task but is important in many areas. For instance a catastrophic failure in a transport system or in a nuclear power plant, the failure of an information processing system in a bank, or in the communication network of a group of banks, leading to financial losses. Being able to evaluate the probability of rare events is therefore a critical issue. Monte Carlo Methods, the simulation of corresponding models, are used to analyze rare events. This book sets out to present the mathematical tools available for the efficient simulation of rare events. Importance sampling and splitting are presented along with an exposition of how to apply these tools to a variety of fields ranging from performance and dependability evaluation of complex systems, typically in computer science or in telecommunications, to chemical reaction analysis in biology or particle transport in physics. Graduate students, researchers and practitioners who wish to learn and apply rare event simulation techniques will find this book beneficial.

A comprehensive overview of Monte Carlo simulation that explores the latest topics, techniques, and real-world applications More and more of today’s numerical problems found in engineering and finance are solved through Monte Carlo methods. The heightened popularity of these methods and their continuing development makes it important for researchers to have a comprehensive understanding of the Monte Carlo approach. Handbook of Monte Carlo Methods provides the theory, algorithms, and applications that helps provide a thorough understanding of the emerging dynamics of this rapidly-growing field. The authors begin with a discussion of fundamentals such as how to generate random numbers on a computer. Subsequent chapters discuss key Monte Carlo topics and methods, including: Random variable and stochastic process generation Markov chain Monte Carlo, featuring key algorithms such as the Metropolis-Hastings method, the Gibbs sampler, and hit-and-run Discrete-event simulation Techniques for the statistical analysis of simulation data including the delta method, steady-state estimation, and kernel density estimation Variance reduction, including importance sampling, latin hypercube sampling, and conditional Monte Carlo Estimation of derivatives and sensitivity analysis Advanced topics including cross-entropy, rare events, kernel density estimation, quasi Monte Carlo, particle systems, and randomized optimization The presented theoretical concepts are illustrated with worked examples that use MATLAB®, a related Web site houses the MATLAB® code, allowing readers to work hands-on with the material and also features the author's own lecture notes on Monte Carlo methods. Detailed appendices provide background material on probability theory, stochastic processes, and mathematical statistics as well as the key optimization concepts and techniques that are relevant to Monte Carlo simulation. Handbook of Monte Carlo Methods is an excellent reference for applied statisticians and practitioners working in the fields of engineering and finance who use or would like to learn how to use Monte Carlo in their research. It is also a suitable supplement for courses on Monte Carlo methods and computational statistics at the upper-undergraduate and graduate levels.

This book provides the first simultaneous coverage of the statistical aspects of simulation and Monte Carlo methods, their commonalities and their differences for the solution of a wide spectrum of engineering and scientific problems. It contains standard material usually considered in Monte Carlo simulation as well as new material such as variance reduction techniques, regenerative simulation, and Monte Carlo optimization.