Simulate thousands of possible portfolio outcomes using Geometric Brownian Motion to understand risk and return distributions.
Configure your simulation
Configure your parameters and click "Run Simulation" to generate thousands of possible portfolio outcomes.
Monte Carlo simulation is a computational technique that uses repeated random sampling to model the probability of different outcomes. In portfolio management, it helps estimate the range of possible returns and assess risk.
This simulation uses GBM, which models asset prices with continuous compounding, drift (expected return), and random shocks scaled by volatility. The formula is: dS = μSdt + σSdW
VaR 95% represents the maximum expected loss with 95% confidence. It's calculated as the difference between your initial investment and the 5th percentile outcome.
Monte Carlo methods are covered in CFA Level II (Quantitative Methods) and Level III (Portfolio Management). Understanding simulation is crucial for risk management and portfolio construction.