As noted in the previous chapter, operations research (OR) techniques used to assist investment decisions need to include simulation as well as optimization procedures. For example, a half-dozen uses of financial simulation to be found in this volume are:
- The GuidedChoice (GC) decision support system (DSS) includes simulation analysis to estimate the likely consequences of decisions by the investor being served.
- Endnote 3 of Chapter 6 refers to the Kim and Markowitz (1989) simulator. This is a market simulator consisting of two types of investors: rebalancers and portfolio insurers. The purpose of this simulator, and the analyses performed with it, was to help settle a dispute between Harry Markowitz ...