Monte Carlo Simulation
 

Has anyone ever created a spreadsheet that used Monte Carlo Simulation?

I've been able to create one that works using the random number
generator in conjunction with discrete probability distributions -
that's fairly easy, just assign a probability to each discrete value in
the distribution and then decide whether or not to select it using a
randomly generated number.

However, I want to perform a Monte Carlo simulation that uses a
-continuous- (not discrete) probability distribution, but have no idea
how I would use the random number generator to then select a value from
the distribution based on its probability of occurance.

I know it can be done, I just have no idea how!

Anyone done anything like this before?

Cheers
-Rob


--
TheRobsterUK


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Rob -

Yes, I do it several times each semester when I'm teaching MBAs. But after a
quick demonstration using worksheet functions, I shift to an add-in that
automates the process.

If you have a function or formula for the inverse of the cumulative function
for the desired distribution, it's easy.

For example, you can get normal-distribution random numbers using
=NORMINV(RAND(),mean,stdev). But NORMINV and RAND are numerically accurate
only in Excel 2003, and it's really slow. So commercial Monte Carlo
simulation software might use the Box-Muller algorithm.

And you can use the Data Table command to replicate trials. Then summarize
results using the array-entered FREQUENCY function or the Histogram tool.

If you'd like to look at my "Example of Simulation in Excel Without
Add-Ins," you can download RandSamp.xls from the "Decision Analysis Using
Excel" page of my university web site http://www.usfca.edu/~middleton.

- Mike
www.mikemiddleton.com

"TheRobsterUK"
wrote in message
news:TheRobsterUK.1vshib_1127441103.9347@excelforu m-nospam.com...

Has anyone ever created a spreadsheet that used Monte Carlo Simulation?

I've been able to create one that works using the random number
generator in conjunction with discrete probability distributions -
that's fairly easy, just assign a probability to each discrete value in
the distribution and then decide whether or not to select it using a
randomly generated number.

However, I want to perform a Monte Carlo simulation that uses a
-continuous- (not discrete) probability distribution, but have no idea
how I would use the random number generator to then select a value from
the distribution based on its probability of occurance.

I know it can be done, I just have no idea how!

Anyone done anything like this before?

Cheers
-Rob


--
TheRobsterUK


------------------------------------------------------------------------
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http://www.excelforum.com/member.php...fo&userid=9924
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In addition to Kike's software, consider looking into PopTools, a free
add-in with *many* features, among them tools to help you with MC simulation
and bootstrapping.

Dave B

"TheRobsterUK"
wrote in message
news:TheRobsterUK.1vshib_1127441103.9347@excelforu m-nospam.com...

Has anyone ever created a spreadsheet that used Monte Carlo Simulation?

I've been able to create one that works using the random number
generator in conjunction with discrete probability distributions -
that's fairly easy, just assign a probability to each discrete value in
the distribution and then decide whether or not to select it using a
randomly generated number.

However, I want to perform a Monte Carlo simulation that uses a
-continuous- (not discrete) probability distribution, but have no idea
how I would use the random number generator to then select a value from
the distribution based on its probability of occurance.

I know it can be done, I just have no idea how!

Anyone done anything like this before?

Cheers
-Rob


--
TheRobsterUK


------------------------------------------------------------------------
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http://www.excelforum.com/member.php...fo&userid=9924
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