removing outlier in Monte Carlo

In a monte carlo simulation, I feel we should never remove any outlier.

The special event we are trying to capture could be an extreme event, such as a deep OTM option getting exercised. Perhaps one in 9 billion realizations is an interesting data point.

Removing any outlier would alter the probability distribution. So our Monte Carlo estimate is no longer unbiased estimate.

However, if there’s a data point with operational or technical error it needs to be removed. Not removing it would also mess up the probability distribution.

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