Monte Carlo Process

Charles Yoe, Ph.D.

College of Notre Dame of Maryland
 Analytical Solution
 Solution meets all criteria of problem
 2+x=4
 x = 2 is a solution that works
 Some problems have more than one analytical solution
 x2 = 9
 Some problems have no analytical solution
 Simulation
 Numerical technique used to estimate analytical solutions
to a problem
 Not an optimization technique, answers what-if questions
 Results are not analytical solutions
 Analytical solutions are preferred
 Monte Carlo Process
 Code name for simulations relating to development of
atomic bomb
 Applied to wide variety of complex problems involving
random behavior
 Procedure that generates values of a random variable based
on one or more probability distributions
 Not simulation method per se
 Suppose . . .
 You have a variable that varies between 10 and 50
 All you know is theoretical maximum and minimum, any
number between is equally likely
 Monte Carlo Process
 Is a process that can generate numbers within that range
 According to the rules you specify
 In this case a min and a max
 Any number as likely as any other number
 Monte Carlo Process
 Two steps
 Generate a simple random number
 Transform it into a useful value using a specific
probability distribution
 Random Number Generation
 Pseudorandom Numbers [0,1]
 Seed = 6721 (any number)
 Mid-square Method (John von Neumann)
 (6721)2 = 45171841; r1= 0.1718
 (1718)2 = 29515240; r2= 0.5152
 (5152)2 = 26543204; r3= 0.5432
 etc.
 More sophisticated methods now used
 Transformation (1)
 Assume Uniform Distribution, U(a,b) where a = 10 and
b = 50
 To obtain a value, x, we use x = a + (b - a)u
 In this case, x = 10 + 40u
 Transformation (2)
 Generate U~U(0,1), say u = 0.1718 then
 x = 10 +(50 - 10)0.1718 = 16.9
 x = 10 +(50 - 10)0.5152 = 30.6
 x = 10 +(50 - 10)0.5432 = 31.7, etc.
 Other distributions are similar but more complex
transformations
 Some Language
 Iteration--one recalculation of the model during a
simulation. Uncertain variables are sampled once during
each iteration according to their probability distributions
 Simulation--technique for calculating a model output value
many times with different input values. Purpose is to get
complete range of all possible scenarios
 Monte Carlo Simulation
 Simulation model that uses the Monte Carlo process
 Deterministic values in models replaced by distributions
 Values randomly generated for each probabilistic variable
in model and calculations are completed
 Process repeated desired # times
Monte Carlo Simulation
0.08 0.4

X =

0.00 0.0
0 10 20 30 40 5.0 8.8 12.5 16.3 20.0

0.02

0.00
0 100 200 300 400
 How Many Iterations?
 Means often stabilize quickly--few hundred
 Estimating probabilities of outcomes takes more
 Defining tails of output distribution takes many more
iterations
 If extreme events are important it make take many many
more
 Some Examples
 The Monte Carlo process is used for several risk
assessments linked to the Clearinghouse
 Salmonella http://www.fsis.usda.gov/ophs/risk/index.
htm
 Antimicrobial Resistant Campylobacter
http://www.fda.gov/cvm/fda/mappgs/ra/risk.html
The End