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Monte Carlo simulation

Monte Carlo simulation is a technique for modeling uncertainty by running a scenario many thousands of times with randomized inputs and assembling the results into a distribution of outcomes. Rather than returning a single estimate, it shows the full range of what could happen and how likely each result is.

In cyber risk, Monte Carlo methods turn uncertain inputs — the likelihood and cost of events — into a loss distribution. From that distribution analysts read percentile losses (for example p5 to p99), conditional value at risk (CVaR), and exceedance curves showing the probability of exceeding a given dollar threshold.