• Text mining and text analysis in action

• So what are the applications of these technologies and what are some
typical text mining tasks? Here are a few examples:

• Text mining allows a business to monitor how and when its products and
brand are being talked about. Using sentiment analysis, the company can
detect positive or negative emotion, intent and strength of feeling as
expressed in different kinds of voice and text data. Then if certain criteria
are met, automatically take action to benefit the customer relationship, e.g.
by sending a promotion to help prevent customer churn.

Monte Carlo Simulation

A Monte Carlo simulation is a mathematical technique that simulates the range

of possible outcomes for an uncertain event. These predictions are based on an
estimated range of values instead of a fixed set of values and evolve randomly.
Computers use Monte Carlo simulations to analyze data and predict a future
outcome based on a course of action.

First, Monte Carlo simulations use a probability distribution for any variable that
has inherent uncertainty. Then, it recalculates the results many times, using a
different set of random numbers within the estimated range each time. This
process generates many probable outcomes, which become more accurate as the
number of inputs grows. In other words, the different outcomes form a normal
distribution or bell curve, where the most common outcome is in the middle of
the curve.
The Monte Carlo method has been described as "faking it a billion times until the
reality emerges." It relies on the assumption that many random samples mimic
patterns in the total population.

Importance of Monte Carlo simulations

Monte Carlo simulations are simple conceptually but enable users to solve
problems in complex systems. They are particularly useful for long-term
predictions because of their accuracy. Monte Carlo simulations are also a good
alternative to machine learning when there isn't enough data to make a machine
learning model accurate. As the number of inputs increases, so does the number
of forecasts.

They also enable accurate simulations involving randomness. For a simple

example, someone could use a Monte Carlo simulation to calculate the
probability of a particular outcome -- say, rolling a seven -- when rolling two dice.
There are 36 possible combinations, and six of those combinations add up to
seven. The mathematical or expected probability of rolling a seven is 6/36, or
16.67%.

External factors, such as the shape of the dice or the surface they are rolled on,
cause the actual or experimental probability to be different from the mathematical
probability. Rolling the dice 1,000 times and getting a seven on 170 of those times
would be the actual probability -- 170/1,000, or 17%, which is close to the actual
probability but not exact. Each roll would be an iteration of the Monte Carlo
simulation, which gets more accurate with each iteration. This property -- that the
actual probability gets closer to the exact probability with more iterations -- is
known as the law of large numbers.

Someone could use Microsoft Excel, IBM SPSS Statistics or a similar program
to run this experiment.

The 4 steps in a Monte Carlo simulation

Although they might vary from case to case, the general steps to a Monte Carlo
simulation are as follows:

1. Build the model. Determine the mathematical model or transfer

algorithm.
2. Choose the variables to simulate. Pick the variables, and determine an
appropriate probability distribution for each random variable.
3. Run repeated simulations. Run the random variables through the
mathematical model to perform many iterations of the simulation.
4. Aggregate the results, and determine the mean, standard deviation and
variant to determine if the result is as expected. Visualize the results on
a histogram
Monte Carlo simulation use cases
Monte Carlo simulations can be used for a spectrum of different industries.
Finance is one of the most common use case examples, but any industry that
involves predicting an inherently uncertain condition has a use for it.

Industry use cases for a Monte Carlo simulation include the following:

• Finance, such as risk assessment and long-term forecasting.

• Project management, such as estimating the duration or cost of a
project.
 • Healthcare and biomedicine, such as modeling the spread of diseases.

Use cases for Monte Carlo simulations also encompass different technologies. In
IT alone, there a many use cases for Monte Carlo simulations. Some of those use
cases specific to IT are the following:

• Network and system design. Monte Carlo simulations can be used to

model different designs, identify potential bottlenecks, and perform
capacity planning and resource allocation.
• Artificial intelligence. Monte Carlo simulations provide the basis for
resampling techniques for estimating the accuracy of a model on a
given data set.
• Cybersecurity. Monte Carlo simulations can be used to
simulate different cyber attacks, evaluate the probability of them
occurring, evaluate their hypothetical impact and identify
vulnerabilities in IT systems.
Advantages of Monte Carlo simulations
Monte Carlo simulations are used in many different areas for a reason. They are
a relatively simple way to make complex predictions. They offer answers to
hypothetical questions and assign a certain level of order to randomness. Other
advantages of Monte Carlo simulations include the following:

• Improve decision-making. Monte Carlo simulations help users make

decisions with a degree of confidence.
• Solve complex problems simply. Monte Carlo simulations show both
what could happen and how likely each outcome is
• Visualize the range of possible outcomes and their likelihood of
occurring. Monte Carlo simulations make it easy to visualize what the
result of a standard decision or outcome might be next to the result of
an unusual outcome.
Drawbacks of Monte Carlo simulations
Despite the advantages of Monte Carlo simulations, there are disadvantages. Like
any simulation, it uses historical data for a future projection, which carries the
risk of being inaccurate. Specific drawbacks of Monte Carlo simulations include
the following:

• Processing power. Monte Carlo simulations require many iterations to

be accurate. Running many iterations takes time and energy and can be
computationally intensive.
• Input bias. This can be damaging if the data used for input is inaccurate
or incomplete.
• Sensitivity to the chosen probability distribution. It is important to
choose an appropriate probability distribution for the problem.
Choosing the wrong one can render the results meaningless.
Common probability distributions used in Monte Carlo simulations
Probability distributions represent a range of values between two limits and can
consist of discrete or continuous values. Discrete probability distributions are
plotted as a sequence of finite numbers in a table, whereas continuous
distributions are plotted as a curve between two points on a graph.

Some common probability distributions in Monte Carlo simulations are the

following:

• Normal distributions. These are continuous distributions where the

most data points cluster toward the middle. It is also called a bell
curve or Gaussian distribution.
• Triangular distributions. These are continuous distributions with
fixed minimum and maximum values. They can be either symmetrical,
where the most probable value equals the mean and the median, or
asymmetrical.
• Uniform distributions. These are continuous distributions by known
minimum and maximum values. All outcomes have the same
probability of occurring.
 • Lognormal distributions. These are continuous distributions by mean
and standard deviation. The values are positive and create a curve that
skews right.

Different probability distributions have different shapes and are suitable

for different contexts.
• Exponential distributions. These continuous distributions are used to
illustrate the time between independent occurrences given the
occurrence rate.
• Weibull distributions. These continuous distributions can model
skewed data and approximate other distributions.
• Poisson distributions. These discrete probability distributions describe
the probability of an event occurring in X periods of time.
• Discrete distributions. These discrete probability distributions help
define the finite values of all possible outcome values.

Monte Carlo simulations can be implemented in programming languages. To

implement a few common distributions in Python, use the following code:

• Normal distribution: [Link].

• Triangular distribution: [Link].
• Uniform distribution: [Link].
• Weibull distribution: [Link].