Monte Carlo Method
A statistical method based on random sampling, Monte Carlo Methods of analysis permeate a very large variety of simulations (traffic modeling, nuclear physics, economics...). The term 'Monte Carlo Method' was coined by physicists working on atomic bombs at Los Alamos National laboratory in the late 1940s. Monte Carlo is well known for its gambling; the concept of a gambler hitting or missing on each "roll of the dice" is associated with the methodology of Monte Carlo Simulations.
Basic Framework
Due to the robust use of Monte Carlo methods, it is difficult to define outside of its use in a particular field. Nevertheless, there is a basic framework that exists in all applications. Through sampling (generation of data points ) it is possible approximate mean values for variables in a complex function. Examining a simple case, a circle is inscribed within a square, it is known that the ratio of areas between the circle and square is equal to pi/4. By uniformly scattering rice over the square and circle, the ratio of rice inside the circle can be compared to those within the square but outside the circle. By multiplying this ratio by 4, the value of pi can be estimated through Monte Carlo method.
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