Saddlepoint approximation method

The saddlepoint approximation method, initially proposed by Daniels (1954) is a specific example of the mathematical saddlepoint technique applied to statistics. It provides a highly accurate approximation formula for any PDF or probability mass function of a distribution, based on the moment generating function. There is also a formula for the CDF of the distribution, proposed by Lugannani and Rice (1980).

Definition

If the moment generating function of a distribution is written as $M(t)$ and the cumulant generating function as $K(t)=\log(M(t))$ then the saddlepoint approximation to the PDF of a distribution is defined as:

${\hat {f}}(x)={\frac {1}{\sqrt {2\pi K''({\hat {s}})}}}\exp(K({\hat {s}})-{\hat {s}}x)$

and the saddlepoint approximation to the CDF is defined as:

${\hat {F}}(x)={\begin{cases}\Phi ({\hat {w}})+\phi ({\hat {w}})({\frac {1}{\hat {w}}}-{\frac {1}{\hat {u}}})&{\text{for }}x\neq \mu \\{\frac {1}{2}}+{\frac {K'''(0)}{6{\sqrt {2\pi }}K''(0)^{3/2}}}&{\text{for }}x=\mu \end{cases}}$

where ${\hat {s}}$ is the solution to $K'({\hat {s}})=x$, ${\hat {w}}=\operatorname {sgn} {\hat {s}}{\sqrt {2({\hat {s}}x-K({\hat {s}}))}}$ and ${\hat {u}}={\hat {s}}{\sqrt {K''({\hat {s}})}}$

References

• Butler, Ronald W. (2007), Saddlepoint approximations with applications, Cambridge: Cambridge University Press, ISBN 9780521872508
• Daniels, H. E. (1954), "Saddlepoint Approximations in Statistics", The Annals of Mathematical Statistics, 25 (4): 631–650, doi:10.1214/aoms/1177728652
• Daniels, H. E. (1980), "Exact Saddlepoint Approximations", Biometrika, 67 (1): 59–63, doi:10.2307/2335316, JSTOR 2335316
• Lugannani, R.; Rice, S. (1980), "Saddle Point Approximation for the Distribution of the Sum of Independent Random Variables", Advances in Applied Probability, 12 (2): 475–490, doi:10.2307/1426607, JSTOR 1426607