Why use the Monte Carlo method?

 

 

Why use advanced mathematical and statistical methods on straight and simple budget calculations?

 

The traditional approach of calculating a project has its disadvantages.  In order to generate reliable decision data, you need very reliable data put into the calculation model you use.  This is the main weakness of any budget and scenario analysis.  Crap into a calculation model means crap out of it.

 

Using Monte Carlo simulation is not by far an exception to this rule, but MCS is less vulnerable to unreliable data into the model as it provides the opportunity to use whole intervals of values, not only single figures.  You don�t have to pick THE ONE particular value to use for an input in your model, you simply use all that make sense (in a probability distribution).  Also, the MC method in itself forces the user to make up her/his mind on whether values are likely, and how their probability is distributed.

 

YourSim is an easily graspable decision tool, easy to use for those who are not mathematicians, statisticians or finance analysts.  It makes advanced methods available for the ordinary do-it-yourself man and woman who is evaluating a business idea to launch in the near or far future.  Easy to learn, little time spent on finding out how it works, what to put in, and how to inturpit what comes out.

 

YourSim provides the probability for generating a loss (negative profit), and graphs and numbers to describe important data as break even and profit. Sensitivity and cash build-up are easily analyzed by manipulating the data put into the model.

 

 

 

 

 

 

 

 

 

 

 

 

Monte Carlo simulation in finance

 

 

Monte Carlo method versus "What-if" analysis

 

 

Quantifying uncertainty in corporate finance

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YourSim  ...... Monte Carlo simulation to the people!

What is YourSim anyway?

 

- YourSim is a spreadsheet decision model that provides the probability for generating a negative profit (a loss), and graphs and numbers to describe important data as break even and profit.