This chapter provides an overview of simulation methods, their role in risk quantification and their relationship to sensitivity, scenario, optimisation and other techniques. We aim to introduce the basic principles in an intuitive and non-technical way, leaving the more technical aspects and implementation methods to later in the text.
For the purpose of describing the fundamental principles of simulation methods, we shall consider a simple model in which:
Of course, despite its simplicity, such a model (with small adaptations) has applications to many other situations, such as:
With some reflection, it is clear that there are 310 (or 59,049) possible combinations of input values: the first input can ...