An Introduction to Monte Carlo Methods and Rare Event Simulation

This paper has two goals. First, it aims at introducing the basic notions of Monte Carlo simulation techniques, when those methods become relevant and how they can be applied efficiently. Simulation is indeed often the most performant model evaluation tool, and can even be the only solution technique to analyse complex models. Output analysis, through a properly designed confidence interval, and variance reduction techniques to get a better accuracy for the same amount of simulation time, will be discussed.