# Tag Info

## Hot answers tagged monte-carlo

2

This sounds correct, however step 2 is a little vague, so I will try to restate the steps here for you. The assets in your portfolio must be priced with respect to a set of risk factors (e.g. interest rate curve). Each scenario consists of a value for each of your risk factors. Given the value of your risk factors you can price your portfolio. You want ...

2

To keep things simple let's assume you have a perfect random number generator (i.e. I will discuss only the statistics not the numerics of the problem). I will also focus on the practical matter and gloss over some mathematical details. From a practical perspective "convergence" means that you will never get an exact answer from Monte-Carlo but ...

2

the output of an MC simulation depends on the random numbers used and if the distribution used is not too weird, after 10,000 runs you will get an answer that is distributed $$\mu + \frac{\sigma}{\sqrt{n}} Z,$$ with $Z$ a standard normal. Here $n=10,000.$ With $\mu$ the quantity you want and $\sigma$ the standard deviation. So you won't get precisely the ...

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