BU275 Chapter Notes - Chapter 14: Capital Budgeting, Summary Statistics, Confidence Interval
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Analogue simulation: replaces a physical system with an analogous physical system that is easier to manipulate (e. g. conditions of weightlessness simulated using rooms filled with water) Computer mathematical simulation: system replicated with a mathematical model that"s analyzed by using the computer. Monte carlo: technique for selecting numbers randomly from a probability distribution. E. g. sampling for use in a trial (computer) run of a simulation. Monte carlo technique isn"t a type of simulation model but a mathematical process used within simulation. In the monte carlo process, values for a random variable are generated by sampling from a probability distribution. Purpose of the monte carlo process is to generate the random variable, demand, by sampling from the probability distribution, p(x) Simulated time: long period of real time (e. g. number of weeks) is represented by a short period of simulated time (e. g. several spins of the wheel)
