MS&E 107 Lecture Notes - Lecture 3: Monte Carlo Method, Central Limit Theorem, Utility
13 Oct 2016
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Handouts - arithmetic of uncertainty reading (flat plus flat equals up in the middle) Extremely hard on pencil and paper (only very special cases) Notion of simulation - called monte carlo simulation. Take ten million numbers, put into bins and plot into histogram. Note: instead of pressing the f9 key a million times, use an add in, select output cells and put in how many times you want it to run. You can go back up to add in, graph the results in a histogram. Question: on average, every part of a project takes 6 weeks to finish. Mindle: drunk person on a highway, average position is center line, but average is dead. Plans based on uncertain assumptions are on average, wrong. Division 1 and division 2, simulation gets graph. Average of function: average penalty of being late released. Function of average: the average cost based on average lateness.
