Using Excel to simulate standard random normal variable

We commonly model asset returns under the idea they are normally distributed. In this tutorial, I explain how we can do this with the following Excel function: = NORMSINV((RAND()). The 'S' indicates a standard normal distribution; by definition, 'standard' refers to a distribution with zero mean and one (1.0) standard deviation. Alternatively, we can use =NORMINV(RAND(),0,1) to achieve the same effect. Then I use this random variable for a very simple Monte Carlo Sim: to simulate a stock price

Category:

Education

Tags:

• Excel
• Quant
• Finance

[brujoezln]

@VoseDavid hi, where can I find this add-in?

[VoseDavid]

There is a free Monte Carlo simulation add-in called ModelRisk that has far more distributions than Excel and automates the graphing, etc.

[sociodaxquina1610P]

What if i want a distribution that does not exist in the excel library?

[Indrius]

Keep up the good work!

Nice one about return simulation, but what about outliers/fat-tails?