I am a physicist. Also i have some information about Monte Carlo simulation. i want to learn financial forecasting with Monte Carlo. Do you have any idea? What do you think financial decisions programming ? How is the future of financial software with Monte Carlo Simulation?
+2
A:
Start with the Monte Carlo methods in finance Wikipedia article, and don't ignore warnings against using this method for financial planning.
Bill the Lizard
2009-06-03 11:57:13
These warnings are made by people of doubtful competence: "James A. Shambo of Lifetime Planning Concepts in Colorado Springs, relying on Monte Carlo is dangerous because the system treats the current market not as a starting point but as merely one of all possible environments. “Monte Carlo can predict a 20 percent return because the simulation started at a 7 P/E and then doubled,” Shambo notes. “But how relevant is that if your real world starting point is a 30 P/E and your real client is a 70-year-old widow worried about how her portfolio will be affected over the next 10-to-20 years?”- pfft
quant_dev
2009-08-29 20:07:27
@quant_dev: Then by all means, ignore the warnings. Nothing bad can happen.
Bill the Lizard
2009-08-29 20:22:58
The point is, *any* decent MC simulation always takes the current market as a starting point. He's fighting straw men.
quant_dev
2009-09-06 02:48:18
A:
This book is a classic: http://www.amazon.com/Monte-Carlo-Methods-Finance-Jaeckel/dp/047149741X
quant_dev
2009-08-29 20:08:47