# Monte Carlo simulation

A Monte Carlo simulation model can be useful to determine the probability of outcomes - which can not easily be predicted due to randomness of input variables - and also to investigate how (strong) outputs correlate with inputs.

## Monte Carlo simulation model parts

A Monte Carlo simulation model consists of the following parts:

- the distribution parameters of random inputs
- the calculation model that generates the outcomes of a
**single run**
- the database, a table that contains al values of inputs/outputs of
**multiple runs** (e.g. 10,000)
- an interface between calculation model and database - a single row of formulas that link to each individual input and output variable, and which has the same layout as the database table
- the statistical analysis of inputs/outputs - also to check the calculation model - with metrics such as average/median/min/max, correlations, probability distribution histograms, and regression scatter charts

It also contains

**short MS Excel VBA code** to run the calculation model multiple times and store inputs/outputs of each run in the database (see MS Excel VBA code at the end of page).

**Download MS Excel Monte Carlo simulation model** (320kB - downloaded
2877 times)

## Monte Carlo simulation model preview

The example has been kept very small on purpose. The focus is to show what the structure of such a model may look like and

**how little MS Excel VBA coding is required**, not to show how to create complex models. This example uses uniform distributions. But you can also generate random variables of other distributions (such as a triangular or a normal distribution): see example 14 of the

MS Excel function reference file.

## Short MS Excel VBA code

Of course, you can make the run length (10,000) a user input variable. In that case, do not forget to add code that clears the database first before starting the simulation.