Lecture K2 (2025-11-25): Variance Reduction Techniques, Part 2 (Antithetic Variates and Importance Sampling)

In this lecture, we review four different Variance Reduction Techniques (VRT's). Namely, we discuss common random numbers (CRNs), control variates, antithetic variates (AVs), and importance sampling. Each one of these is a different approach to reducing the variance in the estimation of relative or absolute performance of a simulation model. Variance reduction is an alternative way to increase the power of a simulation that is hopefully less costly than increasing the number of replications.

We wrap up with a summary of the four VRT's that we have discussed in the class – Common Random Numbers (CRN's), Antithetic Variates (AV's), Importance Sampling, and Control Variates.