Overview

The Monte Carlo method tests a large number (several hundreds or thousands) of "scenarios" in which the inputs are random numbers with given characteristics (range, mean, distribution type, correlations). The results of the model (IRR, net return etc.) are also determined by ranges of values.

Analyzing those ranges we can make a full statistical analysis and determine mathematically the chances of an output being within a specific limit or being higher or lower than a certain threshold.

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