The control variates method is a variance reduction technique used in Monte Carlo methods. It exploits information about the errors in estimates of known quantities to reduce the error of an estimate of an unknown quantity.
Let the unknown parameter of interest be , and assume we have a statistic such that the expected value of m is μ: , i.e. m is an unbiased estimator for μ. Suppose we calculate another statistic such that is a known value. Then
is also an unbiased estimator for for any choice of the coefficient . The variance of the resulting estimator is
It can be shown that choosing the optimal coefficient
minimizes the variance of , and that with this choice,
In the case that , , and/or 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.
We would like to estimate
using Monte Carlo integration. This integral is the expected value of , where
and U follows a uniform distribution [0, 1]. Using a sample of size n denote the points in the sample as . Then the estimate is given by
Now we introduce as a control variate with a known expected value and combine the two into a new estimate
Using realizations and an estimated optimal coefficient we obtain the following results
The standard deviation was significantly reduced after using the control variates technique. (The exact result is .)
This article needs additional citations for verification. (August 2011) (Learn how and when to remove this template message)
- Ross, Sheldon M. (2002) Simulation 3rd edition ISBN 978-0-12-598053-1
- Averill M. Law & W. David Kelton (2000), Simulation Modeling and Analysis, 3rd edition. ISBN 0-07-116537-1
- S. P. Meyn (2007) Control Techniques for Complex Networks, Cambridge University Press. ISBN 978-0-521-88441-9. Downloadable draft (Section 11.4: Control variates and shadow functions)