Monte Carlo Simulation In Excel
by admin on 19/07/09 at 11:56 am
Monte Carlo Simulation Tutorial
Monte Carlo methods are a class of computational algorithms that rely on repeated random sampling to compute their results. The term Monte Carlo Method was coined by S. Ulam and Nicholas Metropolis in reference to games of chance, a popular attraction in Monte Carlo. You can use Excel to imitate real life situations and make predictions. When you create a model in Excel, you define the input parameters and create equations that use those inputs to give you a set of outputs (or response variables). This type of model is usually deterministic, meaning that you get the same results no matter how many times you re-calculate. The following tutorial shows you how to use Microsoft Excel to develop a Monte Carlo simulation without the use of add-ins or special software.
The possibilities are limitless, of course, so no tutorial will exhaust the topic. However, the information presented here provides a solid fundamental understanding of the core concepts, and some advanced techniques for modeling more complex problems.
After completing the tutorial you should have a sufficient understanding of Monte Carlo concepts and Excel capabilities to begin building your own Monte Carlo simulations applied to a wide range of business problems.
