Question

What is Monte Carlo Simulation?

Answer 1

Monte Carlo Simulation, also known as probability simulation, is mathematical computational algorithm used to assess and model the probability of different outcomes which is hard to predict because of intervening random variables. This technique is used in risk analysis, decision making and forecasting and can be applied to different fields such as finance, project management, science, manufacturing, engineering, insurance, supply chain, transportation, etc. It performs risk analysis and decision making by creating a model of probability distribution, with all the possible outcomes of factor that has inherent uncertainty.