In today’s complex world I often wish I could predict the future. Even with my access to enormous amounts of information I still cannot even come close in a world filled with uncertainty, ambiguity, and variability. But like most of you, I run mental calculations to try to analyze possible outcomes and assess risks. With my limited mental capabilities I am running a crude form of Monte Carlo simulations to help me see the possible outcomes of my decisions and assess the impact of risk.
According to Wikipedia, Monte Carlo methods are a broad class of computational algorithms that rely on repeated random sampling to obtain numerical results. By running simulations many times over in order to calculate those same probabilities heuristically just like actually playing and recording your results in a real casino situation.
Today, Monte Carlo simulations are used by professionals in fields such as finance, project management, energy, manufacturing, engineering and the environment just to name a few. Power generation companies and utilities often use Monte Carlo simulations to model revenues/profit and analyze hedging strategies related to their physical assets (e.g., power stations) in order to make key financial decisions. Such complex simulations consume enormous computing resources, and companies typically need to wait many hours for the results of critical analyses. Accelerating the process to deliver simulation data within a few hours would enable energy market participants to better mitigate risk and seize trading opportunities.
We have written before about how cloud computing allows for vast computational resources to be leveraged quickly and easily in bursts when required. This is a perfect fit for running Monte Carlo simulations as energy professionals can compress the time to run these simulations by orders of magnitudes. With this said, we are delighted to partner with Ventyx and Wipro to introduce a risk analytics solution that uses Monte Carlo simulations running in the Windows Azure cloud platform that will help energy companies improve profitability and mitigate risks. You can read about the details in the press release here. This truly is an exciting solution and is just another example of how the cloud is transforming the way we work. May the cloud be with you! – Jon C. Arnold