Monte Carlo Simulation

Yes I agree. I would be proud to say I understood everything he put into that one. I don't. Its a very good book to have.

Good luck
Steve

 

game theory?

 

'************************************************************
' standard normal random variate *
'************************************************************
Function gauss()
Dim fac As Double, r As Double, v1 As Double, v2 As Double
10 v1 = 2 * Rnd - 1
v2 = 2 * Rnd - 1
r = v1 ^ 2 + v2 ^ 2
If (r >= 1) Then GoTo 10
fac = Sqr(-2 * Log(r) / r)
gauss = v2 * fac
End Function

 

And a spreadsheet ...

 

Sheesh! The dude looks like he should down quite a few Drambuies before partying lie a Monkey at Tiger-Tiger

Then again, I'm "Jim Beamed" ar the moment!

 

Thank you for replying to the thread I did not receive an alert that you did and thats why it has taken so long for me to say thank you.

 

Hi guys,

My question is specifically about the Z "variate" value.


Is this just a normal-distributed random number between 0 and 1?


I'm not drawing the connection to Z and the normal distribution.

 

Z can take values between -infinity and +infinity and is effectively a normal random variable.

 

Monte Carlo does not assume upward drift, nor anything about volatility; it is a method of simulation (using random numbers and iterating over large numbers of trials) that, as has already been pointed out, is used in Physics as well as finance.
Maybe you're confusing Monte Carlo with Black Scholes? The Black Scholes model posits a drift, but the PDE derived doesn't depend on drift, although yes I think it does assume a fixed vol? (sorry no options expert here..)

 

I realize this is Statistics 101, but what we're generating is a Z score, or std_devs away from the mean, right?