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 ...
Get Financial Mathematics now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
