# I need to respond to two classmate!

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Discuss the difference between the Monte Carlo simulation and Crystal Ball. Under what conditions would you choose one over the other? Post an example to when each would be used. Be sure your example is different from the examples of your classmates.

Respond to at least two of your classmates. Discuss if you agree with their choice of under what conditions to use each type of simulation. Explain why you do or do not agree.

Refer to the Module Eight Discussion Rubric for directions on completing these discussions.

1 Running Head: Simulation methods Simulation Method Name of Student Institutional Affiliation Course Simulation Methods 2 Hello Class, Monte Carlo simulation is a mathematical technique that is computerized to allow people to account for risks based on quantitative analysis and decision making while the crystal ball is the spreadsheet-based application used in predictive modeling, optimization, forecasting, and simulation. Monte Carlo models the probability of different outcomes in a process that is quite difficult to be predicted as a result of the intervention of random variables. It also understands the impact of risk as well as the uncertainties in prediction and models used in forecasting. On the other hand, Crystal ball makes a provision of advanced optimization and calculation capabilities even though it does build on existing Monte Carlo and modeling tools for predictions. When it comes to choosing one simulation method over the other, there are a few conditions that should be measured. First, I would select Monte Carlo over Crystal ball because of it overs various benefits over deterministic/ single-point estimate analysis. Monet Carlo’s probabilistic results show what could happen and the nature of the outcome. It also creates graphs of various outcomes and their probabilities of occurrence. Additionally, it allows the modeling of interdependent relationships between input variables. Lastly, I would consider Monte Carlo because even Crystal ball used it in overcoming limitation experiences with traditional spreadsheet analysis. However, I would choose crystal ball over Monte Carlo because of a few factors. First, it provides several types of charts and reports that are displayed both graphically and numerically. Simulation Methods 3 Second, it is easy to extract the value of simulation when one wants to use them in other application. An instance where Monte Carlo simulation method can be used is when minimizing the energy of a system with the employment of Metropolis algorithm. One of the usages of the Metropolis algorithm is the Ising model. This involves choosing a pin, changing it and calculating the energy of the system that is if the energy minimizes accept it for calculation. This is repeated until the energy is minimized. Another instance where crystal ball is used is when a potential purchase wants to buy an apartment. The crystal ball will be used in making assumptions like the amount of rent to be paid in the area, the number of units to be rented per month, the operating costs per month for the entire apartment. These assumptions can be used in estimating the profitability of the apartment considering the various combinations of rented units and operating costs. References Charnes, J. (2013). Financial modeling with crystal ball and excel. Hoboken, NJ: Wiley. McLeish, D. L. (2013). Monte carlo simulation and finance. Hoboken, NJ: Wiley.

achiaovintel
School: University of Virginia

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Monte Carlo and Crystal Ball Simulation Response
Response to Kanija Sayles’ Post
Thank you for your post. First, I agree that the examples you have used for both Monte
Carlo and Crystal Ball are appropriate. Using Monte Carlo for determining the number of boiler
tubes required by the maintenance department is very appropriate since in...

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