Monte-Carlo simulations use large amounts of random numbers (law of large numbers) to simulate an underlying problem. The simulation is used to caluclate and obtain an (average) numerical results.
The development of pseudorandom number generators was thus spurred by Monte-Carlo Simulations.
Such simulations are often used to simulate financial systems that affect the value of instruments, portfolios or investements.
Steps
Definition domain of possible inputs
Generation of random inputs from a specific probability distribution over the domain.
Use deterministic formula to calculate output from random input.
Aggregation of resultDeterministic calculation of output from.