Monte Carlo simulation (3)

Monte Carlo Method was invented in middle forties of a past 20th century during Manhattan project of developing the atomic bomb. It was necessary to solve the complicated model with stochastic behaviour of the atom particles.

Years after this method found wide application in many fields: financial advising, statistical physics, bioinformatics, engineering, etc. as a powerful tool for uncertainty analysis, risk assessment, integral computations, ... 

Schematic representation of Monte Carlo simulation with uncertain input parameters

Steps in Monte Carlo simulation

 

  • Step 1: Create a model, F = f(x1, x2, ..., xn)
  • Step 2: Generate a set of random inputs, xi1, xi2, ..., xip.
  • Step 3: Simulate the model and store the results as yi.
  • Step 4: Repeat steps 2 and 3 for i = 1 to n.
  • Step 5: Analyze the results (array F=[y1, y2, ..., yp])

 


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