Daily Archives: April 3, 2013

Portfolio Risk Management & Analysis With Monte Carlo Simulations

The future’s uncertain, which is why it’s so essential to consider what could happen, or not, from a variety of perspectives. Every attempt at modeling and forecasting is wrong, of course. That’s the nature of the prediction beast. But different methodologies are wrong in different ways. That doesn’t mean that we should refrain from guesswork. Au contraire. More is better, up to a point, and assuming that that we diversify out toolkit and remain humble with regards to expectations. You can’t get blood out of a stone and no methodology under the sun can offer certainty on what may be lurking around the corner. But if you don’t spend time considering the possibilities, you’re more vulnerable than necessary when it comes to estimating and managing risk and minimizing the surprise factor.

Continue reading