15-01-2013, 11:01 AM
SIMULATION
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Monte-Carlo Simulation
The principle behind the Monte Carlo simulation techniques is replacement of the given system under analysis by a system described by some known probability distribution and then drawing random samples from probability distribution by means of random numbers.
The Monte-Carlo simulation technique consists of following steps:
1. Setting up a probability distribution for variables to be analysed.
2. Building a cumulative probability distribution for each random variable.
3. Assign an appropriate set of random numbers to represent value or range (interval) of values for each random variable.
4. Conduct the simulation experiment by means of random sampling.
5. Repeat step 4 until the required number of simulation run has been generated.
6. Design and implement a course of action and maintain control.