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Title: Interpolation, quadrature and stochastic integration
Authors: Lee, Lung-Fei
Keywords: Interpolation
Stochastic integration
Variance reduction
Control variate
Panel data
Issue Date: Oct-2001
Citation: Econometric theory, v. 17, iss. 5, Oct. 2001, p. 933-961
Abstract: This paper considers features in numerical and stochastic integration approaches for the evaluation of analytically intractable integrals. It provides an unification of these two approaches. Some important features in quadrature formulations, namely, interpolation and region-partition, can provide valuable device for the design of stochastic simulator. An interpolating function can be used as a valuable control variate for variance-reduction in simulation. We illustrate possible variance-reduction by some numerical cases with Gaussian quadrature. The resulted simulator may also be regarded as a monitor of the approximation error of a quadrature.
Rights: Â© Cambridge University Press 2001. This paper was (will be) published in Econometric theory and is reprinted with permission.
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