Implementation of Monte-Carlo Simulations in Economy and Finance

As a matter of fact, Stochastic processes are widely happened in the daily life, where a typical approach to simulate the process by calculating the mean value is achieved through Monte Carlo simulation. Monte Carlo simulation arose from the research requirements of the Manhattan Project in the United States. Because this method is closely related to probability, its name is derived from Monte Carlo, a gambling city in Monaco. This paper investigates the methods and ideas embodied in the use of Monte Carlo simulation in finance and economics. According to the analysis in this study, Monte Carlo simulation is used in three practical cases of real estate project investment, barrier option, and highway construction to obtain prediction results and feasibility suggestions based on a series of indicators. This research aims to help people understand Monte Carlo simulation and the thinking mode of probability science it embodies, then promote the optimization of Monte Carlo simulation method itself. Overall, these results shed light on guiding further exploration of implementations for Monte Carlo simulations.