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research article

Chebyshev Inequalities for Products of Random Variables

Rujeerapaiboon, Napat  
•
Kuhn, Daniel  
•
Wiesemann, Wolfram
2018
Mathematics of Operations Research

We derive sharp probability bounds on the tails of a product of symmetric non-negative random variables using only information about their first two moments. If the covariance matrix of the random variables is known exactly, these bounds can be computed numerically using semidefinite programming. If only an upper bound on the covariance matrix is available, the probability bounds on the right tails can be evaluated analytically. The bounds under precise and imprecise covariance information coincide for all left tails as well as for all right tails corresponding to quantiles that are either sufficiently small or sufficiently large. We also prove that all left probability bounds reduce to the trivial bound 1 if the number of random variables in the product exceeds an explicit threshold. Thus, in the worst case, the weak-sense geometric random walk defined through the running product of the random variables is absorbed at 0 with certainty as soon as time exceeds the given threshold. The techniques devised for constructing Chebyshev bounds for products can also be used to derive Chebyshev bounds for sums, maxima and minima of non-negative random variables.

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Type
research article
DOI
10.1287/moor.2017.0888
Author(s)
Rujeerapaiboon, Napat  
Kuhn, Daniel  
Wiesemann, Wolfram
Date Issued

2018

Published in
Mathematics of Operations Research
Volume

43

Issue

3

Start page

887

End page

918

Subjects

Chebyshev inequality

•

Probability bounds

•

Distributionally robust optimization

•

Convex optimization

Note

Available from Optimization Online

URL

URL

http://www.optimization-online.org/DB_HTML/2016/05/5449.html
Editorial or Peer reviewed

REVIEWED

Written at

EPFL

EPFL units
RAO  
Available on Infoscience
May 18, 2016
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/126188
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