Monte Carlo method
Randomized numerical technique
A Monte Carlo method uses random sampling to solve problems that might be deterministic in principle but intractable in practice.
Named for the casino, these computational techniques run thousands or millions of random trials to estimate probabilities, approximate integrals, or model complex systems: We used Monte Carlo simulation to assess the portfolio's risk.
The approach is foundational in physics, finance, and machine learning.
Function quantifying probabilistic outcomes
- probability distributionFunction assigning likelihoods to outcomes
- expected valueProbability-weighted outcome average
- law of large numbersConvergence through repetition
- random walkChance-governed sequential movement
Selecting by pure chance
- variance reductionLowering estimate scatter
- convergenceProcess of approaching sameness
- bootstrapStart without external resources
- resamplingRepeated random selection method
Evaluating likelihood of harm
- credit riskPotential for borrower nonpayment
- capital allocationDistributing funds among investments
- stress testingEvaluating capacity under extreme conditions
- algorithmic tradingComputer-driven market transactions
Matter shifting between states
- percolationLiquid passing through pores
- fluctuationsIrregular rises and falls
- nucleationInitial cluster formation
Itinerant commercial representative
- genetic algorithmOptimization mimicking natural selection
- local minimumLowest nearby, not overall
random variable
Function quantifying probabilistic outcomes
- probability distributionFunction assigning likelihoods to outcomes
- expected valueProbability-weighted outcome average
- law of large numbersConvergence through repetition
random sampling
Selecting by pure chance
- variance reductionLowering estimate scatter
- convergenceProcess of approaching sameness
- bootstrapStart without external resources
risk assessment
Evaluating likelihood of harm
- credit riskPotential for borrower nonpayment
- capital allocationDistributing funds among investments
- stress testingEvaluating capacity under extreme conditions
phase transition
Matter shifting between states
- percolationLiquid passing through pores
- fluctuationsIrregular rises and falls
- nucleationInitial cluster formation
traveling salesman
Itinerant commercial representative
- genetic algorithmOptimization mimicking natural selection
- local minimumLowest nearby, not overall
- probabilityprobability, chance, random, randomness, odds
- uncertaintyuncertainty, uncertain, unknown, unsure, unclear
- Polish ScienceMarie Curie, Nicolaus Copernicus, Copernicus, polonium, heliocentrism
- simulation techflight simulator, driving simulator, VR headset, motion capture, digital twin
- pi calculationinfinite series