Spin of the Wheel: The Role and Reality of Monte Carlo Simulations
Risk Management; New York › Vol. 53 Nbr. 8, August 2006
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Summary
Hurricane Katrina, Sep 11 and other recent disasters across the world represent tragic examples of worst-case events that have become an increasingly prominent -- and permanent -- feature of the modern risk management landscape. This has made the use of analytical tools such as Monte Carlo simulations more critical than ever when preparing for the kinds of doomsday situations that can ruin an enterprise overnight. Because Monte Carlo methods use repetitive algorithms and a large number of calculations, they are best suited for computerized simulations. While any company's focus should be on the proper identification and quantification of risks to help better plan for worst-case scenarios, only after the necessary actions are taken will it truly be better prepared for the future. An informed and prepared organization will have a significant competitive advantage when dealing with worst-case scenarios.
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Spin of the Wheel: The Role and Reality of Monte Carlo Simulations
MONTE CARLO SIMULATION
Hurricane Katrina, September 11 and other recent disasters across the world represent tragic examples of worst-case events that have become an increasingly prominent-and permanent-feature of the modern risk management landscape. This has made the use of analytical tools such as Monte Carlo simulations more critical than ever when preparing for the kinds of doomsday situations that can ruin an enterprise overnight. But getting the most out of such methods can be anything but easy.Monte Carlo methods are a widely used class of computational algorithms for simulating the behavior of various complex s...See the full content of this document
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