1. Is Monte Carlo simulation part of classical decision theory and standard decision-making construct?

2. Which of the uncertainties you mentioned does monte-carlo simulation addresses?

3. Is monte-carlo simulation a sense-making or an analytical tool?

4. Some say risk favours ‘known’ unknowns. But I guess sense-making the way you described is trying to say – do we really think what we know is the right thing to be known?

Thanks a lot.

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]]>Hi Andrew,

Thanks for reading and for the refs. I’ve downloaded both papers and am looking forward to reading them.

Regards,

K.

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]]>Two useful documents when thinking about uncertainty beyond probability distributions with known parameters are:

[1] Sev Len Sven Ove Hansson’s “Decision Theory: a Brief Introduction” at http://people.kth.se/~soh/decisiontheory.pdf

and

[2] “Warning: Physics Envy May Be Hazardous To Your Wealth” at http://sloanweb.mit.edu/media/Lo_PhysicsEnvy.pdf

I’m am not – of course – suggesting for one moment that typical ERM people actually do factor this into their analysis in practice, though I’m suggesting they should.

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