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Monte Carlo Simulation: Business Optimization & Financial Decision Making | Excel Modelling
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- čas přidán 14. 08. 2024
- Want to know what a Monte Carlo Simulation is? and how to use Monte Carlo Simulation technique for a profitable business ? In this video I have performed Monte Carlo Simulation in Excel.
What is a Monte Carlo Simulation?
Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted due to the intervention of random variables. It is a technique used to understand the impact of risk and uncertainty in prediction and forecasting models.
Monte Carlo simulation can be used to tackle a range of problems in virtually every field such as finance, engineering, supply chain, and science.
Monte Carlo simulation is also referred to as multiple probability simulation.
Excel is a wonderfully flexible and powerful tool. For example, you can create models that let you modify your formula's inputs to estimate sales revenue and costs. You can also model systems that use random events such as product demand to estimate resource utilization and other costs.
Now before we get into today’s video where I will show you how to setup an excel model which can help you run an effective Monte Carlo Simulation to optimize your organizations supply chain and can help you with financial decision making.
Let’s discuss what a Monte Carlo Simulation actually is?
Monte Carlo simulation is a method of probability analysis done by running several variables through a model to determine the different outcomes
By using Monte Carlo simulations decision makers can determine the range of possibilities and their probability of occurrence. A Monte Carlo simulation works by constructing a mathematical model of the decision under consideration. Then the simulation is run, and different random variables are put into these models until there are enough outcomes to plot on a probability distribution curve. Based on the shape of curve created by the Monte Carlo simulation, decision makers will know where their ultimate decision falls within the various probabilities, they then make their decision based on the risk they are willing to take to get the outcome they want.
Now, let’s get to excel where I can show you how all of this actually works.
So, what you see on my screen is divided under three sections. Model Data, Probability of Item Demand & Simulation Data.
Creating an Excel simulation does involve a lot of steps, but once you get the hang of it, it's an extremely powerful tool that you'll be able to use over and over throughout your business and it's operations.
Monte Carlo Simulation in fiance is widely used for investment evaluation and can be used in several other industries and for different purposes.
Monte Carlo Simulation is widely used in Finance and can be performed on various platforms like Monte Carlo Simulation in Matlab, Monte Carlo Simulation in R, Monte Carlo Simulation in Excel, Monte Carlo Simulation in Python, etc. Important thing to derive from this video is, performing Monte Carlo Simulation in Excel [Monte Carlo Simulation in excel data table is the key] can help you get probability distribution curve, which can tell you the probability of different outcomes of the scenario under consideration. This is widely used by profitable business to calculate the investment curve and profit and loss statement etc.
#MonteCarloSimulation #MsExcel
The explanation was very clear and concise.
Thanks!
Very good modeling.
Great video with great explanations!
Thanks, appreciate it!
Hi. I am trying to create a data table like the one you showed by putting row argument as $C$2 and column argument as $E$12, but it is giving error. Could you explain why?
thanks for giving this video, very clear and easy to understand
Glad you found it useful!
we just link the formula in C12 to B16 and it will automatically understand that we're going to calculate profit?
Why must in B16, can it be another? can you help me explain... :((((
I’ll get back to you!
Great!
amazing video!
Thanks, make sure to check other related videos too!!
Hi! Your video is easy to understand! Great explanation! May I have a copy of the excel file? Thanks!
Yeah, share me your email
this is amazing man
thanks
appreciate the appreciation! ;)
Thank you for the great video, please share the Excel file . kind regards
Glad you liked the video, let me check if I still have the file. Meanwhile, share your email
wow The way you have presented the sheet is easy despite i need to dig in more about the monte carlo. thanks a lot. i am grateful to your sharing knowledge. Do you have something related to project cost to anticipate the budget?
Yes I do
in the probability of demand table the no. of units are 2.5,6,10,15K's respectively. But in your simulation data, it is 2.5,10,13 and 15. Why?
Well, you can have the same or different numbers.
The variable row header inputs in the data table indicate the production level of the machinery available in the market. In the real world, demand levels won't necessarily match what a unit can produce. But if they do, you can keep it same. Hope it helps
Hi may I have the copy of the excel file that you used here so I could practice on? Finals is coming and this is a great help
Okay
Okay
This is lovely. may i ask for the copy of the excel file?
Let me check
Thank you! you explained it quite well! Can I have a copy of the excel file?
Okay
Hi may I have the copy of the excel file
It’s been long time since I uploaded the video, let me check for you
@@krishnachiddarwar505 Thank you so much
Would have been great if you added the excel file
Let me check If I still have the file, share me your details so I can send over!
which app do u use for video editing?
Adobe premier
Please provide this excel sheet
Done