Lesson 10: Monte Carlo Simulation
February 12, 2020
Review:
- Random Variables
- Stock Market Simulation
Presentation:
- Monte Carlo Simulation
- Lecture by John Guttag (MIT OpenCourseWare)
Activity:
- Revise your Stock Market Simulation
- Add a “fixed income” (bonds) component to your simulation
- Assume annual bond market returns are normally distributed
- Assume mean = 7.88% and standard deviation = 6.86%
- or …. N(7.88,6.86)
- Your “portfolio” should be 60% stocks and 40% bonds
- Rerun the simulation n=30+
- How does the distribution of ending balances change?
Assignment:
- Study for Quiz 05, covering the Guttag Monte Carlo Simulation lecture.