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arXiv:2302.14119v4 Announce Type: replace
Abstract: Characterized by an outer integral connected to an inner integral through a nonlinear function, nested integration is a challenging problem in various fields, such as engineering and mathematical finance. The available numerical methods for nested integration based on Monte Carlo (MC) methods can be prohibitively expensive owing to the error propagating from the inner to the outer integral. Attempts to enhance the efficiency of these approximations using the quasi-MC (QMC) or randomized QMC (rQMC) method have focused on either the inner or outer integral approximation. This work introduces a novel nested rQMC method that simultaneously addresses the approximation of the inner and outer integrals. This method leverages the unique nested integral structure to offer a more efficient approximation mechanism. By incorporating Owen's scrambling techniques, we address integrands exhibiting infinite variation in the Hardy--Krause sense, enabling theoretically sound error estimates. As the primary contribution, we derive asymptotic error bounds for the bias and variance of our estimator, along with the regularity conditions under which these bounds can be attained. In addition, we provide nearly optimal sample sizes for the rQMC approximations underlying the numerical implementation of the proposed method. Moreover, we indicate how to combine this method with importance sampling to remedy the measure concentration arising in the inner integral. We verify the estimator quality through numerical experiments in the context of expected information gain estimation. We compare the computational efficiency of the nested rQMC method against standard nested MC integration for two case studies: one in thermomechanics and the other in pharmacokinetics. These examples highlight the computational savings and enhanced applicability of the proposed approach.