Triaset software uses many mathematical formulas and various statistical model of probability to give its users the potential maximum losses that they could suffer within a period of time. Photo/AFP
How are financial markets and nuclear weapons similar? Apart from the famous description of a class of financial instruments called derivatives as “financial weapons of mass destruction” by Berkshire Hathaway chairman and CEO Warren Buffett, both use the “Monte Carlo method”.
The Monte Carlo method is used to estimate probability of an outcome influenced by various elements, a process which was discovered by Polish-American mathematician Stanislaw Marcin Ulam in late 1940s when he was working at the Los Alamos National Laboratory. Academician David Bendel Hertz first introduced the method to financial world in the early 1960s.
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