Thursday, April 22, 2010

Examples of Monte Carlo simulation

I often get asked about materials on Monte Carlo simulation, specifically, examples of MC simulation (software neutral). Examples of MC simulation are somewhat hard to come by. The books which deal with MC simulation mostly cover the theoretical aspects of it, and offer a few trivial examples like calculating the area of a circle using random numbers, or numerical integration (although, I agree, that the numerical integration using MC simulation is not a trivial example in general).

For examples of where and how one can use Monte Carlo simulation, one great resource would be the example library we have in Oracle Crystal Ball. This is how to access these examples: If you don't have access to Oracle Crystal Ball, then you can download a seven-day trial at []. Note that, you might have to register or log in.

Once you have access to the software, then start Oracle Crystal Ball with Microsoft Excel. At this point, if you navigate the Help -> Crystal Ball -> Examples guide, you will find a list of about 50 or so real world examples ranging in different subject areas like finance, manufacturing, supply chain, oil and gas, six-sigma etc., and even one groundwater cleanup model. The examples cover all aspects of the Oracle Crystal Ball software - so one can learn how MC simulation is used with optimization, forecasting etc. Each example discusses the problem, how the problem is mathematically modeled, and how to perform MC simulation using Oracle Crystal Ball. Even if you run out of the trial time, you can still refer to the example problems and the way they are modeled. And, of course, you do not have to necessarily use Oracle Crystal Ball to test the examples. Just use your favorite software or programming language and try out the examples.

Update (3/16/2011): Edited download link.