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Monte Carlo Simulation


Definition: Monte Carlo Simulation is a computer-based technique that performs probabilistic forecasting of possible outcomes to facilitate decision making.
The approach was developed by John von Neumann and Stanislaw Ulam during WWII with the aim of improving decision-making in situations with inherent uncertainty. The name "Monte Carlo" was chosen due to the resemblance of the modeling approach to games of chance, like roulette, and was inspired by the well-known casino town of Monaco.
Since its inception, MCS has been applied to assess risk in various situations, including artificial intelligence, stock prices, sales forecasting, project management, and pricing.


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