Monte Carlo Simulation
By: A Staff Writer
Updated on: Jul 19, 2024
What: Runs mathematical models repeatedly, varying inputs based on probability distributions to assess a range of potential outcomes.
Who: Used for decades in scientific fields, now accessible to entrepreneurs due to more powerful software.
Why: Helps quantify risk when there’s historical data to work with, but still significant uncertainty.
When: For financial forecasting with uncertainty, project risk assessment, or complex decision models where many variables are at play.
How:
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- Requires statistical knowledge and specialized software.
- Interpretation is key – don’t be blinded by the math!