lect19- Monte Carlo Simulat

# lect19- Monte Carlo Simulat - ISE 460 Engineering Economy...

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Click to edit Master subtitle style 12/1/10 ISE 460: Engineering Economy University of Southern California Fall 2010 Joseph Chow Week 12: Lecture 19

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12/1/10 HW Schedule Summary 12/1/10 33 HW #7, due 11/19/10 Lecture 16 7.1 7.2 Lecture 18 7.3 Lecture 19 7.4

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12/1/10 Review Prior Deterministic methods of economic analysis Sensitivity analysis, breakeven analysis This Week Stochastic methods of economic analysis – incorporating random variables Numerical methods: Monte Carlo simulation 12/1/10 44
12/1/10 On Tuesday we covered… How to obtain NPW pdf/cdf as a simple function of random variables Know what kind of questions can be answered with the result Evaluate random NPWs based on Pareto optimality Recognize the limitations of these “closed-form” approaches in the real 55

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12/1/10 Simulation 66
12/1/10 Risk Simulation 12/1/10 77 Analytical approach not always convenient or even feasible! Interdependencies of variables Functions may not be simple Monte Carlo Simulation: do random draws of distributions of random variables many times, and accumulate results to develop a

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12/1/10 Monte Carlo Simulation of Ten 12/1/10 If you roll 10 6-sided dice, what is the probability the sum will be less than 30? We know each 6-sided die has the following cumulative distribution: What is the CDF for the sum of 10 dice rolls???
12/1/10 PMF and CDF of Sum of 10 Dice Rolls 99

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12/1/10
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## This note was uploaded on 11/30/2010 for the course ISE 460 taught by Professor Bottlik during the Spring '06 term at USC.

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lect19- Monte Carlo Simulat - ISE 460 Engineering Economy...

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