Skip to Content

simulation risk modeling method

Simulation risk modeling method is a risk modeling method that requires a large number of computer-generated "trials" to approximate an answer.

On This Page

simulation risk modeling method

Simulation risk modeling method is a risk modeling method that requires a large number of computer-generated "trials" to approximate an answer.

Additional Information


These methods are relatively robust and flexible, can accommodate complex relationships (e.g., so-called path-dependent relationships commonly found in options pricing), and depend less on simplifying assumptions and standardized probability distributions. The principal advantage over analytic methods is the ability to model virtually any real-world situation to a desired degree of precision. This is often called the Monte Carlo method.

Synonyms

Monte Carlo Method