The Monte Carlo method offers a number of advantages over predictive models with fixed inputs, such as the ability to perform sensitivity analysis or calculate the correlation of inputs.
The technique is used for forecasting, which takes into account risk, uncertainty and variability.
Simulation allows us to study the interactive effect of individual components or variables to determine which ones are important. Time compression is possible. The effect of ordering, advertising or other policies over several months or years can be obtained by computer simulation in a short time.
The Monte Carlo method was invented by John von Neumann and Stanislaw Ulam during World War II to improve decision making under uncertain conditions. It was named after a well-known casino town called Monaco because the element of chance is central to the modeling approach, similar to a roulette game.
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