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Monte Carlo Simulation: Presented By-Labnya Dutta Ray Sougata Ash Sougata Mondal Syed Rahman

The document discusses Monte Carlo simulation, which uses random numbers to simulate complex systems and analyze outcomes. It provides examples of how Monte Carlo simulation works by: [1] constructing a model of a system with inputs and outputs; [2] experimenting with the model by inputting random numbers; and [3] drawing inferences about the system's behavior based on the outputs. Specifically, it presents a simulation for determining optimal laptop orders each week based on past sales data and random numbers representing demand probabilities.

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Sougata Ash
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191 views

Monte Carlo Simulation: Presented By-Labnya Dutta Ray Sougata Ash Sougata Mondal Syed Rahman

The document discusses Monte Carlo simulation, which uses random numbers to simulate complex systems and analyze outcomes. It provides examples of how Monte Carlo simulation works by: [1] constructing a model of a system with inputs and outputs; [2] experimenting with the model by inputting random numbers; and [3] drawing inferences about the system's behavior based on the outputs. Specifically, it presents a simulation for determining optimal laptop orders each week based on past sales data and random numbers representing demand probabilities.

Uploaded by

Sougata Ash
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Monte Carlo

Simulation

PRESENTED BY-
LABNYA DUTTA RAY
SOUGATA ASH
SOUGATA MONDAL
SYED RAHMAN
What is Monte Carlo (MC) method ?

The Monte Carlo method: is a numerical method


for statistical simulation which utilizes sequences
of random numbers to perform the simulation.

It was named Monte Carlo because of the Monaco resort


town renowned for its casinos.
What the meaning of MC simulation?

●MC simulation is a versatile tool to analyze


and evaluate complex measurements

● Constructing a model of a system

●Experimenting with the model to draw inferences of


the system’s behavior
A simulation model

Inputs outputs
Measures of
Decision and
Simulation performance or
uncontrollable
model behaviour of the
variables
system
A simulation model cont..
 Model inputs capture the environment of the problem
 The simulation model
 Conceptual model: set of assumptions that define the system
 Computer code: the implementation of the conceptual model
 Outputs describe the aspects of system behavior that we are
interested in
Random numbers

 Uniform Random numbers or pseudo-random numbers (PRN)


are essentially independent random variables uniformly
Distributed over the unit interval (0,1).

 The PRNs are good if they are uniformly distributed,


statistically independent and reproducible.
Example:

The manager of computer world, a store that sells a computer and related equipment, is attempting to determine how
many laptops the store should order each week. A laptop sells for Rs. 4300. The number of laptop demanded each
week ranges from 0 to 4.
From Past sales record. The manager has determined the probability of demand for laptops for the past 15 weeks
Given: Inventory Cost- Rs50& shortage Cost- Rs150

From the past sales records, the manager has determined


the probability of demand for laptops for the past 100
weeks.
Demand 0 1 2 3 4
Frequenc 20 40 20 10 10
y

Simulate the demand of 15 weeks from the following random numbers:


39,73, 72,15,37,02,87,98,19,47,33,21,95,27,69.
Demand Frequency Probability Cumulative Frequency Range Of Random Numbers

0 20 0.2 20 0-19

1 40 0.4 60 20-59

2 20 0.2 80 60-79

3 10 0.1 90 80-89

4 10 0.1 100 90-99

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