“If you can’t describe what you are doing as a process,
you don’t know what you’re doing”
W. Edwards Deming

How to perform a Monte Carlo simulation

To simulate is to try to duplicate the features, appearance and characteristics of a real system.

The idea behind simulation is to imitate a real-world situation mathematically, to study its properties and operating characteristics, to draw conclusions and make action decisions based on the results of the simulation.

The real-life system is not touched until the advantages and disadvantages of what may be a major policy decision are first measured on the system’s model.


  1. Thank you for this guide, it is very helpful. However, when the random variable creates a value smaller than the lowest probability (5% in your example), Excel gives a #N/A error. Any tips on bypassing this error?

  2. Gerard Cooney says:

    A very good guide. A couple of things I noticed:
    On p23 Guide currently states; “Even though the variable values in cells F9:F208 … are dummies”. This should refer to E9:E208 instead.

    Also, on p20, suggest dummy cell F5 should be labelled as such so not inadvertently deleted. Also, guide currently states “… cell F5 contains our dummy formula”. This should be ” … cell F5 contains our dummy variable”

Help make the handbook better