what is a monte carlo simulation

A Monte Carlo simulation is a mathematical technique that predicts possible outcomes of an uncertain event by using random sampling. It is a model used to predict the probability of a variety of outcomes when the potential for random variables is present. Monte Carlo simulations are useful for simulating systems with many coupled degrees of freedom, such as fluids, disordered materials, strongly coupled solids, and cellular structures. The simulation uses repeated sampling to obtain the statistical properties of some phenomenon or behavior. Monte Carlo simulations sample from a probability distribution for each variable to produce hundreds or thousands of possible outcomes. The results are analyzed to get probabilities of different outcomes occurring. Monte Carlo simulations are commonly used to evaluate the risk and uncertainty that would affect the outcome of different decision options. Monte Carlo simulations are used to tackle a range of problems in many fields including investing, business, physics, and engineering.