Control variates: Difference between revisions

No change in size ,  10 years ago
:<math>\textrm{var}\left[m^{\star}\right]=\left(1-\rho_{mt}^2\right)\textrm{var}\left[m\right]</math>;
 
hence, the term [[variance reduction]]. The greater the value of <math>\vert</math>\vert\rho_{tm}\vert</math>, the greater the variance reduction achieved.
 
In the case that <math>\sigma_m</math>, <math>\sigma_t</math>, and/or <math>\rho_{mt}</math> are unknown, they can be estimated across the Monte Carlo replicates. This is equivalent to solving a certain [[least squares]] system; therefore this technique is also known as '''regression sampling'''.
Anonymous user