Monte Carlo simulation is a computational technique used to model and analyze the behavior of complex systems under uncertain or stochastic conditions. It is named after the famous casino city of Monte Carlo in Monaco, which is known for its games of chance and randomness.
The simulation involves generating a large number of random samples or scenarios and using statistical methods to analyze the results. By repeating the simulation multiple times, it provides an estimate of the probability of different outcomes and identifies the variability and risks associated with the system.
Monte Carlo simulation is widely used in fields such as finance, engineering, economics, and risk management to evaluate investment opportunities, project risks, and other complex scenarios where traditional analytical methods may not be sufficient. It is a powerful tool for decision-making and risk analysis, allowing businesses to make informed decisions and minimize potential losses.
Monte Carlo simulation
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