Using a Chen-Stein identity to obtain low variance simulation estimators

Abstract This paper is concerned with developing low variance simulation estimators of probabilities related to the sum of Bernoulli random variables. It shows how to utilize an identity used in the Chen-Stein approach to bounding Poisson approximations to obtain low variance estimators. Applications and numerical examples in such areas as pattern occurrences, generalized coupon collecting, system reliability, and multivariate normals are presented. We also consider the problem of estimating the probability that a positive linear combination of Bernoulli random variables is greater than some specified value, and present a simulation estimator that is always less than the Markov inequality bound on that probability.