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The University of Southampton
Economic, Social and Political Sciences

Hypothesis verification for simulation models: Theory and applications Seminar

4 April 2014
Building 58 room 1007

For more information regarding this seminar, please telephone Centre for Population Change on 02380 594080 or email .

Event details

Social Sciences seminar

In the presentation we propose a method of hypothesis verification for stochastic simulation models using samples of their outputs. A Bayesian procedure is developed to evaluate the probability that the hypothesis under investigation is true for a single simulation input. Next, we prove that the only coherent way of aggregating such probabilities over different simulation inputs is by averaging. Moreover, conditions for averaging to give consistent and asymptotically unbiased evaluation of input space proportion, for which the tested hypothesis is true, are given. Finally, it is shown that in hypothesis verification, under limited simulation effort capacity assumption, there is a bias-variance trade-off between the number of input points sampled and sample size per point. The obtained theoretical results are illustrated by analysis of a simulation model presented in paper "Volatility Clustering in Financial Markets: Empirical Facts and Agent-Based Models" by Cont (2007).

Speaker information

Bogumił Kamiński , Division of Decision Analysis and Support, Institute of Econometrics, Warsaw School of Economics. Assistant Professor Head of Decision Analysis and Support Division

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