Question: # 2 ( Conditional Monte Carlo vs . Stratified Sampling ) Suppose that Y is a binomial random variable with parameters n = 1 0

#2(Conditional Monte Carlo vs. Stratified Sampling) Suppose that Y is a binomial random variable with parameters n=10 and p=0.5. Suppose that, conditioned on Y=y,x is a normal random variable with mean y and variance 4. We want to use simulation to efficiently estimate =P(x5).
(a) Design a simulation algorithm that only generates i.i.d. random variables.
(b) Design a simulation algorithm that uses conditional Monte Carlo method. Clearly specify the estimator you are using. Calculate the variance of the conditional Monte Carlo estimator;
(c) Design a simulation algorithm that uses stratified sampling. Assuming that each stratum k contains npk samples. Clearly specify the estimator you are using. Calculate the expected variance of this stratified sampling method.
(d) If we use the optimal number of samples for part (c), will your variance result change?
(e) Compare the variance reduction results of part (b) and part (c) against part (a) and explain why one is greater than the other.
Please provide python code. thanks
# 2 ( Conditional Monte Carlo vs . Stratified

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!