Pathological realizations among Monte Carlo results?

A retirement planning tool is only as good as its assumptions and inputs. Share your thoughts or ask questions about the internals of the simulation, built in planner assumptions, or planner inputs.
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GDK
Posts: 12
Joined: Wed Jun 07, 2017 10:29 pm

Pathological realizations among Monte Carlo results?

Post by GDK » Thu Jun 29, 2017 10:10 pm

Wondering if highly unlikely Monte Carlo realizations are identified and excluded from the probability of success calculation -- or if they don't occur. My expectation from Monte Carlo is that I might see an occasional multiple sigma rate of return, and maybe that would be a + or - 25% or 30% return. But if I saw a + or - 50%, I would exclude it. I can't tell from the output that FRP produces. Thoughts?

Thank you

jimr
Posts: 518
Joined: Thu Feb 28, 2008 6:48 pm

Re: Pathological realizations among Monte Carlo results?

Post by jimr » Thu Jun 29, 2017 10:26 pm

There's no magic built into the simulation logic in that respect. It just takes what the pseudo random generator gives it and runs with it.

GDK
Posts: 12
Joined: Wed Jun 07, 2017 10:29 pm

Re: Pathological realizations among Monte Carlo results?

Post by GDK » Fri Jun 30, 2017 6:00 pm

Got it, thanks Jim!

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