Discrete Approximations of Probability Distributions

Practical limits on the size of most probabilistic models require that probability distributions be approximated by a few representative values and associated probabilities. This paper demonstrates that methods commonly used to determine discrete approximations of probability distributions systematically underestimate the moments of the original distribution. A new procedure based on gaussian quadrature is developed in this paper. It can be used to decrease the error in the approximation to any desired level.

• 저널Management Science · 29(3) · 352–362
• 토픽Simulation Techniques and Applications · Management Science and Operations Research
• DOI10.1287/mnsc.29.3.352
• 저자Allen C. Miller, Thomas R. Rice