Monte Carlo "result" question

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Monte Carlo "result" question

Postby WebX99 » Tue Aug 07, 2012 11:12 am

I have read quite a few posts on the forum and even asked support a few questions about Monte Carlo to further my understanding of it.
I see many discussions of portfolio results matching or not matching Monte Carlo results.

I have a general understanding of Monte Carlo. What I do not quite understand is what is considered the Monte Carlo "result"?
I see a graph of interations starting with 1 on the left going up to 1000 on the right. Along this graph are different "results".
So what part of the graph is considered the Monte Carlo "result" that I would compare to my portfolio?

Below the graph is a table with the Interations column showing "1000" in every cell.
Do I assume that the data from 1000 interations is the "result"?
In that case, I would further assume that the more interations, the more accurate the Monte Carlo model becomes.

Let me know if I have it right.... :D ... or wrong... :|

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Re: Monte Carlo "result" question

Postby Overload » Wed Aug 08, 2012 8:19 am

Technically, the Monte Carlo result is the chart of 1000 iterations. However, the chart itself can't be used in numerical analysis. For this reason, we generate an average of the 1000 results, and that is the "result" you see at the bottom.

Yes, more iterations are probably better, but there is also a balance between the number of iterations and the time it takes to run them.

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