Monte Carlo Simulation

Quantitative Metrics

A Monte Carlo simulation uses random sampling to estimate the probability of different outcomes in a process that cannot easily be predicted due to random variables. In investing, it models the range of possible portfolio or strategy outcomes.

Monte Carlo takes 'what if' analysis to the next level — instead of one outcome, it runs thousands of randomized scenarios to generate a probability-weighted distribution of results. It is defined here because you will meet it in research and vendor material.