simulation using constraints

CFA Level II
#1

Hello,

In the reading they talked about using various constraints on simulations.

Would you know how this is done?

There are several types of constraints that can be imposed on simulations (book value, cash flow and market value). but how is this done in the simulation itself?

#2

In general, you can do one of two things:

  1. Impose constraints to prevent situations such as negative book value
  2. Tabulate the number of times you encounter such situations

The latter is probably more useful than the former.