One-node quadrature beats monte carlo

Description

"In conventional stochastic simulation algorithms, Monte Carlo integration and curve fitting are merged together and implemented by means of regression. We perform a decomposition of the solution error and show that regression does a good job in curve fitting but a poor job in integration, which leads to low accuracy of solutions. We propose a generalized notion of stochastic simulation approach in which integration and curve fitting are separated. We specifically allow for the use of deterministic (quadrature and monomial) integration methods which are more accurate than the conventional Monte Carlo method. We achieve accuracy of solutions that is orders of magnitude higher than that of the conventional stochastic simulation algorithms"--National Bureau of Economic Research web site.

Subjects

Series Statement

• NBER working paper series -- working paper 16708
• Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16708.

Links

• http://www.nber.org/papers/w16708