O'Reilly logo

Financial Mathematics by Roman N. Makarov, Giuseppe Campolieti

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Chapter 17

Introduction to Monte Carlo and Simulation Methods

17.1 Introduction

The Monte Carlo method is a numerical technique that allows scientists to analyze various natural phenomena and compute complicated quantities by means of repeated generation of random numbers. For example, if you make several thousand tosses of a fair (i.e., balanced) coin, then you may notice that the long-run ratio of a count of heads to the total number of tosses is approaching one half. If the limiting ratio is not close to one half, then you may conclude that the coin is not balanced. Similarly, researchers can compute other more complicated quantities, although in reality nobody tosses coins and throws dice. Instead, computer simulations are used. First, a ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required