Question

Bill Phillips is developing a Monte Carlo simulation to value a complex and thinly traded security. Phillips wants to model one input variable to have negative skewness and a second input variable to have positive excess kurtosis. In a Monte Carlo simulation, Phillips can appropriately use:_________

Answer 1

Answer: Both of them

Explanation:

The Monte Carlo Simulation is a forecasting technique that allows one to find out the probability of occurence of different outcomes which may be difficult to come up with because there are multiple random variables involved.

Monte Carlo simulations are used in many diverse fields such as Finance, Engineering and Science.

As earlier mentioned, this simulation allows for multiple random variables so Phillips can use it to model both the variables to have different characteristics.