The simulation-based testing is essential for safely implementing autonomous vehicles (AVs) on roads, necessitating simulated traffic environments that dynamically interact with the Vehicle Under Test (VUT). This study introduces a VUT-Centered environmental Dynamics Inference (VCDI) model for realistic, interactive, and diverse background traffic simulation. VCDI is built on a Transformer-based trajectory inference model to generate trajectories for background objects. Serving the purpose of AV testing, VCDI additionally considers VUT-centered interactivity and scenario diversity using a conditional inference framework. First, the VUT future motion is taken as an augmented model input to bridge the interaction between VUT and background objects. Second, to enrich the scenario diversity, a Bayesian-network-based cost function module is designed. The module, learned in a distributional form, captures the uncertainty of the VUT's strategy, triggering various scenario evolution. Experimental results validate VCDI's trajectory-level simulation precision which outperforms the state-of-the-art trajectory prediction work. The flexibility of the distributional cost function allows VCDI to provide diverse-yet-realistic scenarios for AV testing. We demonstrate such capability by modifying the anticipation to VUT's cost-based strategy and thus achieve multiple testing scenarios with explainable background traffic evolution.
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