As a risk analyst for GlobalBank Corp., one of my key responsibilities is risk assessment for a diverse investment portfolio. One of the key tools from my statistical toolbox is, without a doubt, Monte Carlo Simulations.
A major project involved estimating the potential losses from our credit portfolio. Utilising MATLAB, we modeled the likelihood of defaults for each credit line, assigning probabilistic distributions based on financial history and economic indicators.
My role was to run thousands of simulations, analyzing potential outcomes of defaults under varying economic conditions. The Monte Carlo Simulations helped us map a probable Value at Risk (VaR) for our portfolio, aiding our decision-making process concerning capital reserves.
The outcomes enabled us to make informed decisions about risk mitigation strategies, contributing significantly to strengthening our financial stability. This project helped me appreciate the critical role Monte Carlo Simulations play in financial risk management.