Simulation

A collection of entities, components, or elements forms a complex, which we like to term as a system. These elements contain specific attributes that are often time dependent and can take numerical or logical values. In fact, for our area of interest, i.e., financial securities are examples of time-dependent nondeterministic systems whose state values are nothing, but the security values themselves. Once a nondeterministic system's probability model is in place, the next obvious stage is to generate outputs from there and explore the full state space if possible. Doing so helps to determine the average response and its variance from the system. This mechanized and virtual exploration of the system without physical involvement is known as simulation.