Tuesday, March 4, 2014

Monte Carlo Details

10:42 AM


How are the economic scenarios used in the Monte Carlo simulations generated? Are they generated within the software, or does the software contain a set of hundreds of scenarios that are used when necessary?

I am trying to understand the stochastic projection component of this software better.

Any more information on this aspect of the software would be appreciated. Thanks.


The random scenarios are generated assuming rates of returns of each asset class follow a lognormal distribution. Expected returns and standard deviations are based on historical information adjusted for current trends.

Random numbers are generated using Microsoft's random number generator. Each time the program runs a set of simulations the returns are generated based on the random number generator.

There is a blog post about Monte Carlo simulation:


You will also find some information in the RetireWare help files:


On a related matter, this is a blog post about risk analysis and our approach:



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