MONTE CARLO SIMULATION - ITS APPLICATION & EFFICACY IN OFFICE SPACE INVESTMENT ANALYSIS

Abstract

Real estate investment has been axiomatically reckoned as a unique econo¬ mic venture that brings about lucrative windfall. Nevertheless, oblivious of this fallacy is the truism that high return of investment is invariably accompanied by high risk. Thus cognisance about the risk involved in real estate investment should be consideredly taken so as to justify the inves¬ tor's stance in expending a huge amount of money with the view to multi¬ plying its indeterminate future return. This study has built up a case for the use of a contemporary risk analysis technique i.e Monte Carlo Simulation to quantify the systematic risk in¬ herent in the office building investment. Its "cutting edge" is in help¬ ing the investor to formulate an investment policy that explicitly incor¬ porates an integral risk-return decision-making criterion that could rati¬ onalise the proper disposal of economic resources.