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This lesson is a part of the course Value at Risk
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Monte Carlo Simulations correspond to an algorithm that generates random numbers that are used to compute a formula that does not have a closed (analytical) form – this means that we need to proceed to some trial and error in picking up random numbers/events and assess what the formula yields to approximate the solution. Drawing random numbers over a large number of times (a few hundred to a few million depending on the problem at stake) will give a good indication of what the output of the formula should be.
