Lesson 3: Monte Carlo Simulation

Question 1

Monte Carlo Simulation

Answer 1

the most through method for project analysis (allow us consider all possible combinations of model variables in an aggerate framework)

Question 2

Steps

Answer 2

Step 1: build the model of interest, M, a function of severable variables
Step 2: Generate n random values of vector v variables
Step 3: For j = 1,2,…,n: determine the value of the quantity of interest (mj)
Step 4: Using m1, m2,…,mn -> approximate cumulative distribution func F(m)
F(m) = number of (m1,m2,…,mj that are ≤ m) / n