Monte Carlo Simulation
In its most basic form, the Monte Carlo simulation seeks to simulate realworld outcomes by showing a range of outcomes for a given variable set. For example, in the casino game roulette, Monte Carlo could simulate where the roulette ball lands for 10 consecutive rounds.
Excel's "RAND" function can generate random numbers in a given sample set. By simply setting the formula equal to RAND, Excel will generate a random number between 0 and 1. To detail the range of possible outcomes, Microsoft states that around 25% of the time, a number less than or equal to 0.25 should occur, and around 20% of the time the number will be at least 0.90, which is logical and intuitive, given the outcomes are restricted to such a tight range.
Excel offers a number of other ways to simulate random variable outcomes. For instance, the "NORMINV" function returns the inverse of the normal distribution for a specified mean and standard deviation.
BlackScholes Formula
The valuation of stock options can be incredibly complex and mathintensive. Excel offers a number of ways to price stock options, including the more plain vanilla puts and calls. The BlackScholes formula is the most widely adopted measure for valuing an option. Its inputs are as follows:
S=Today's stock price
t=Duration of the option (in years)
X=Exercise price
r=Annual riskfree rate (This rate is assumed to be continuously compounded.)
Ïƒ=Annual volatility of stock
y=Percentage of stock value paid annually in dividends
Excel doesn't have an actual formula employing BlackScholes, but there are addins, as well as additional outside files that can be downloaded to help the user calculate the value of a put or call option.
Time Value of Money
The time value of money generally relates to the concepts of present value and future value, as explained previously in the PV Functions and FV Functions. The basic forms of the time value of money, which consists of multiplying an initial present value by an interest rate to get to a future value, can easily be calculated via a single cell calculation in Excel.
The more complicated theories, including DCF, DDM and RIM, require more sophisticated modeling techniques in Excel and have also been touched upon in previous pages.

Investing
Explaining the Monte Carlo Simulation
Monte Carlo simulation is an analysis done by running a number of different variables through a model in order to determine the different outcomes. 
Investing
What Can The Monte Carlo Simulation Do For Your Portfolio?
A Monte Carlo simulation allows analysts and advisors to convert investment chances into choices. The advantage of Monte Carlo is its ability to factor in a range of values for various inputs. 
Investing
Create a Monte Carlo Simulation Using Excel
How to apply the Monte Carlo Simulation principles to a game of dice using Microsoft Excel. 
Investing
Monte Carlo Simulation With GBM
Learn to predict future events through a series of random trials. 
Trading
How To Convert Value At Risk To Different Time Periods
Volatility is not the only way to measure risk. Learn about the "new science of risk management". 
Investing
Stimulate Your Skills With Simulated Trading
Think you can beat the Street? We'll show you how to test your abilities without losing your shirt. 
Trading
Bet Smarter With The Monte Carlo Simulation
This technique can reduce uncertainty in estimating future outcomes. 
Investing
Disadvantages Of Stock Simulators
Stock simulators enable one to practice trading, but they have some disadvantages that you should be aware of, before transitioning to actual trading. 
Markets
Simulating Stock Prices Using Excel
We will use the average of the change in log prices, the volatility, the normal distribution and Excel to formulate the future prices of an asset. 
Trading
How Do You Use Stock Simulators?
Stock market simulators let you pick securities, make trades and track the resultsall without risking a penny.