Interactive simulation

ABSTRACT

A new generation of software performs Monte Carlo simulation nearly instantaneously on arbitrary spreadsheet models. In effect, it does for probability distributions what the spreadsheet did for numbers. In addition, the concept of a Stochastic Information System is introduced, in which distributions are stored as realizations of a stochastic process. A single variable is stored as a Stochastic Information Packet (SIP), a multivariate distribution as a Stochastic Library Unit, Relationships Preserved (SLURP). This leads to the Fundamental Equality of SLURP algebra: P(F(x, y)) = F(P(x, y)) where x and y are random variables, P(x, y) is the SLURP representing their joint distribution, and F is a function of x and y. Live computer demonstrations will include distribution arithmetic, the Flaw of Averages, a retirement simulation developed for a New York trust company, and interactive portfolio model used at a major petroleum firm.