Latin Hypercube vs. Monte Carlo Sampling

A copula structure generated using RLHS.

In a recent posting on Linked In entitled The pros and cons of Latin Hypercube sampling, David Vose compares Latin Hypercube sampling to Monte Carlo and argues that the advantages of Latin Hypercube are so minimal that "LHS does not deserve a place in modern simulation software." [1]  It is an interesting article and he makes several good points, yet despite extensive application to thousands of real-life probabilistic models over several decades, products like Analytica and Crystal Ball still provide Latin Hypercube sampling and even use it as the default sampling method. Why is this? Are we, the makers of the simulation software products, naïve? As the lead technical architect of Analytica over the past two decades, I've studied the performance of Latin Hypercube vs. Monte Carlo over hundreds of real-world models, and examined the question of whether we should continue to keep Latin Hypercube as the default sampling method. My conclusion is that it does make sense to keep Latin … [Read more...]

Combination of Assessed Distributions

Future Population

Suppose you need information about the future population Metropolia City in the year 2020.  So you solicit two experts to provide assessments of this quantity and provide their expert judgments in the form of distributions as shown. Which assessment is better?  Who is right?  How can you combine these to arrive at a combined distribution that embodies the combined knowledge of both experts? The experts' distributions in this example are LogNormal(100K, 1.2), and LogNormal(90K,2). Calibration Arguably the most important criterion for judging a subjective assessment is for the source of that assessment (i.e., the expert) to be well-calibrated.   Calibration is a property of the assessor, not a property of a single assessment, and reflects the accuracy to which an expert can quantify his degree of uncertainty.   Being well-calibrated reflects the idea that over the course of many assessments, his assessed probabilities correspond to the empirical frequency of … [Read more...]