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Wednesday, March 1, 2017

Expect the Unexpected! Use a Monte Carlo Simulations.


Expect the unexpected!  

"How do I do that?"  you ask.

Figure out what is logical to happen, and then think about what illogical thing could happen instead.

The probability of the illogical happening may be bigger than the logical.  Why?   Because we can't know everything.  We don't know all the factors that may contribute to the problem at hand.  What's worse, is that we often don't know what we don't know.  Sometimes we may know the parameters but not the possible values.  We have to guess at the possible values.

What's the good in guessing?   Well, sometimes you may be able to specify a range of values for a guess, and you may also be able to associate a probability that a particular guess will occur.
You can do the calculation repeatedly and calculate a probability for each possible outcome.

There is a mathematical, computerized tool for doing this.  It is called, a Monte Carlo Simulator and is used to calculate probable outcomes for all kinds of problems where factors are unknown and some degree of risk is involved.


R. Allan Worrell
Author:  Father John's Gift



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