Monte Carlo simulation Sample Clauses

Monte Carlo simulation. Monte Carlo simulation has been used for risk analysis since 1940s which is an important statistical technique to evaluate the uncertainty (X. Xxxxxx, X.X. Xxxxxxx and X. Xxxxxx, et al., 2007). In general, Monte Carlo simulation uses repeated random sampling of key primary variable that may have great impact on NPV and makes strategies through analyzing the probability distributions of the cash flows or NPV. It is widely used in petroleum industry for dealing with uncertainty in investment decisions. Typically, in some real investment projects, managers may have an idea about the range of values but not aware of the meaning of exact numbers. Monte Carlo simulation could generate any number of forecasts by the overall cash flow distribution. Monte Carlo simulation usually follows these steps when implementing in petroleum sector (Xxxxxxxxxx Xxxxx, 1996).
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