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Chapter 2

This chapter discusses different types of simulation systems and simulation concepts. Continuous systems have state variables that change continuously over time and are typically modeled using analytical methods. Discrete systems have state variables that change at discrete time intervals and are usually modeled using numerical computational methods. Monte Carlo simulation is introduced as a technique that uses random sampling to understand the impact of risk and uncertainty in models. It involves running models multiple times with random variable values to obtain probability estimates.

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62 views38 pages

Chapter 2

This chapter discusses different types of simulation systems and simulation concepts. Continuous systems have state variables that change continuously over time and are typically modeled using analytical methods. Discrete systems have state variables that change at discrete time intervals and are usually modeled using numerical computational methods. Monte Carlo simulation is introduced as a technique that uses random sampling to understand the impact of risk and uncertainty in models. It involves running models multiple times with random variable values to obtain probability estimates.

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Chapter 2-

Simulation Concepts
Concepts of Continuous /
Discrete System simulations
From the viewpoint of simulation, there are
two fundamentally different types of system:

Continuous systems
Discrete systems
Continuous systems
 State variables change continuously as a function of
time and generally, analytical method like
deductive mathematical reasoning is used to define
and solve the system.
 Systems that are continuous usually involve some
sort of fluid or fluid-like substance.
o Fluid-like substances could include any type of
small-particle, high-volume material that flows like a
fluid. These types of materials are usually measured
by weight rather than count. Other examples:
o Water treatment plants
o Chemical industries not including distribution points
Discrete systems
 State variables change at discrete points in
time and generally numerical method like
computational procedures is used to solve
mathematical models.
 Each change of the state of the system is called
event.
– For example, the arrival or departure of customer in
a queue is an event.
 Examples:
Stores, Bank, Service centers, Manufacturing
facilities, Transportation centers
Numerical Integration
vs.
Continuous Simulation
Four distinguishing characteristics
differentiate simulation from any
computer program:
1. simulation objective is to achieve correctness,
simulation is computational intensive, and there
is no typical use of simulation. As time is an
indexing variable, the use of such variable can be
discrete or continues. Such use of the time
variable is reflect in the approaches and method
of simulation.
Four distinguishing characteristics
differentiate simulation from any
computer program:
2. The second feature is reflect in the
discussion of validation and verification of the
simulation program. To achieve correctness is
a major goal of any simulation program;
furthermore, the proof of correctness is a
challenge of simulation
Four distinguishing characteristics
differentiate simulation from any
computer program:
3. Simulation major feature is the time
indexing variable, which is a challenge on its
own. Another element that makes simulation
computational intensive is animation.
Animation in relation with time variable is
very challenging to master in any simulation
program.
Four distinguishing characteristics
differentiate simulation from any
computer program:
4. The fourth feature is distinguishing of
simulation; there is no typical use of
simulation. The uses of simulation range from
transport systems to molecule interactions.
Hence, simulation is colored from within its
use.
Analog vs. Digital Simulation,
and Hybrid Simulation
Computers used for the simulation of
continuous dynamical systems have been
analog, digital, or hybrid, the latter
combining the first two into a single
computing system.
Analog Computers
 Electronic analog computers implement
mathematical relations between physical
variables (typically electrical voltages) with
separate (parallel) computing elements
working simultaneously.
 Each element effects a simple operation such
as addition, multiplication, and, most
important of all, integration with respect to
time.
Digital Computers
 In digital simulation, the state equations are
integrated by discrete approximation, and it
is not by coincidence that great strides were
made in the 1950's and 1960's in the
theoretical aspects of the numerical solution
of differential equations.
 Digital computers have the capability to
perform simulation of continuous systems
in increasingly favorable technical
conditions.
Hybrid Computers

 To expand their capability, analog


computers were combined at first with
patchable logic elements and, later, with
digital computers to form hybrid
(digital/analog) computers.
Hybrid Computers cont…
 The earliest attempts to combine analog and
digital computers to form hybrids took
place around 1958, at Convair Astronautics
and at the Space Technology Laboratories
(both in California) as ad hoc systems for
specific simulations. The problems to be
solved were aerospace vehicle trajectory
calculations.
Analog vs Digital Simulation

Historically, analog computers came into


being years before digital computers did, and
have played a major role in simulation of
continuous dynamic systems. Although
analog computers are giving way to digital
computers at an increasing pace, they are still
occasional use.
Analog vs Digital Simulation
(Cont…)
The following is the comparison in terms of:

 Accuracy
– The result from a digital simulation is more
accurate than that from analog simulation.
Analog vs Digital Simulation
(Cont…)
The following is the comparison in terms of:
 Needed Scale
The magnitudes of dependent variables are
represented in an analog computer by voltages. This
magnitude scaling is tedious task in an analog
simulation, because there are usually many variables
and their maximum values are not known in
advance.
In a digital computer with floating point arithmetic,
the magnitude scaling problem does not arise
because the quantities that can be represented on a
digital computer have a very large range.
Analog vs Digital Simulation
(Cont…)
The following is the comparison in terms of:
 Hardware setup
– In analog simulation, input constants and initial
conditions are incorporated by setting up
voltages and potentiometers.
– A simulation program on a digital computer can
be easily stored for reuse.
Monte Carlo Simulation
Monte Carlo Simulation

 It is a technique used to understand the


impact of risk and uncertainty in prediction
and forecasting models.
 It is also referred to as a multiple
probability simulation.
Understanding a Monte Carlo
Simulation
When faced with significant uncertainty in the
process of making a forecast or estimation,
rather than just replacing the uncertain
variable, the Monte Carlo Simulation might
prove to be a better solution by using multiple
values.
Understanding a Monte Carlo
Simulation
Since business and finance are plagued by
random variables, Monte Carlo simulations
have a vast array of potential applications in
these fields. They are used to estimate the
probability of cost overruns in large projects
and the likelihood that an asset price will
move in a certain way.
Understanding a Monte Carlo
Simulation
Telecoms use them to assess network
performance in different scenarios, helping
them to optimize the network. Analysts use
them to assess the risk that an entity will
default, and to analyze derivatives such as
options.
Understanding a Monte Carlo
Simulation
Insurers and oil well drillers also use them.
Monte Carlo simulations have countless
applications outside of business and finance,
such as in meteorology, astronomy, and
particle physics.
Monte Carlo Simulation History
 Monte Carlo simulations are named after
the popular gambling destination in
Monaco, since chance and random
outcomes are central to the modeling
technique, much as they are to games
like roulette, dice, and slot machines.
 “Monte Carlo” simulation: The technique
was first used by scientist working on the
atom bomb used to simulate bombing raids.
Given the security code name “Monte-
Carlo”.
Monte Carlo Simulation Method
The basis of a Monte Carlo simulation is that the
probability of varying outcomes cannot be
determined because of random variable interference.
Therefore, a Monte Carlo simulation focuses on
constantly repeating random samples to achieve
certain results. A Monte Carlo simulation takes the
variable that has uncertainty and assigns it a random
value. The model is then run and a result is provided.
This process is repeated again and again while
assigning the variable in question with many
different values. Once the simulation is complete, the
results are averaged together to provide an estimate.
Applications in Real Life
 Since business and finance are plagued by random
variables, Monte Carlo simulations have a vast
array of potential applications in these fields. They
are used to estimate the probability of cost
overruns in large projects and the likelihood that
an asset price will move in a certain way.
 Telecoms use them to assess network performance
in different scenarios, helping them to optimize
the network. Analysts use them to assess the risk
that an entity will default, and to analyze
derivatives such as options
Applications in Real Life
 Insurers and oil well drillers also use them.
 Monte Carlo simulations have countless
applications outside of business and
finance, such as in meteorology, astronomy,
and particle physics.
End
of
Chapter 2 !!!

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