1. MONTECARLO (STATIC) SIMULATIONS
SIMULATION EXAMPLES
MONTECARLO (STATIC) SIMULATIONS

2. Examples Monte-Carlo (Static) Simulation
Estimating profit on a sale promotion
Newsvendor problem
Estimating p value
Approximating integrals

3. Profit on a Sale Promotion
Furniture Store
Unit cost: $175
Demand distribution : TRIA(500, 2000, 3500)
Unit price distribution : UNIF(200, 300)
50% off sale
Determine the order amount for maximizing profit.
Estimating profit on a sale promotion

4. Newsvendor Problem Determine the order amount for maximizing profit
Wholesale price : $0.55
Retail price : $1.00
Scrap price : $0.03
Demand distribution : NORM(135.7, 27.1)
Determine the order amount for maximizing profit
Newsvendor Problem

5. Estimating p value X, Y ~ uniform (0,1) 1
Estimate p value by simulation 1
p/4 1

6. Convergence to p

7. Approximating Integrals
Consider the integral
Making the substitution
we get
where

8. Approximating Integrals
Let Y ~ uniform(0,1)
Approximate the integral by simulation