dimarts, 9 d’abril de 2013

Monte Carlo simutation: the best tool to reckon with discrete and normal random variables


In this lesson I learnt that Monte Carlo simulation is the best tool to estimate both average return and the risk factor of new product, to determine which products came to the market, or for activities such as forecasting net income for the corporation, predicting structural and purchasing costs, or determining its susceptibility to different kinds of risk (GM is a company which use in this way).

Lilly company uses simulation to determine the optimal plant capacity for each drug.

Proctor and Gamble uses simulation to model and optimally hedge foreign exchange risk.

Sears uses simulation to determine how many units of each product line should be ordered from suppliers.

Oil and drug companies use simulation to value "real options", such as the value of an option to expand, contract, or postpone a project.

Financial planners use Monte Carlo simulation to determine optimal investment strategies for their clients retirement.

You could see one example by clicking here

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