Friday, March 14, 2014

In honor of Pi Day : Estimating the value of pi via Monte Carlo simulation

In honor of $\pi$ day, I'll run you through calculating the numerical value of $\pi$ using a method called Monte Carlo simulation. It is basically a type of simulation that samples a lot random values from a distribution. It is used widely to solve many types of problems including those that don't have closed form solutions like estimating the value of numerical integrals, sensitivity analysis, bayesian inference, predicting election results, stock price movements and the list goes on ...

In our scenario, we want to calculate the value of $\pi$. To do this, we''ll be throwing darts at a square dart board (dimensions : 1 by 1) with a quadrant (radius : 1) in it. After throwing a bunch of darts at the board, we'll find the ratio of the number of darts that end up inside the quadrant to the total number of darts we threw and then multiply that number by 4 to get an estimate for the value of $\pi$

Lets work through the math

$4 \times \frac{A_{quadrant}}{A_{square}} = 4 \times \frac{\frac{1}{4}\pi r^{2}}{(1)^2} = 4 \times \frac{\frac{1}{4}\pi(1)^2}{(1)^2} = 4 \times \frac{\frac{1}{4}\pi}{1} \approx  \frac{N_{hits}}{N_{trials}}  \approx   \pi  $

In our Monte Carlo simulation, we'll be sampling random points onto our 1 by 1 space and comparing the number of points that end up in the quadrant to the total number of points.

From the code sample above and my cli, we see that as we increase the number of trials, our estimated value of $\pi$ gets closer to the real value. And if you run enough trials you will approach steady state (true value). Another version of the code sample runs a lot of trials, so you can visually see what's happening to the estimated value of  $\pi$

See the graph below. The peaks occur between 3.140 and 3.144, which tells us that the true value of $\pi$ lies somewhere in that range

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