This is useful when a policy or fund provides a guarantee, e.g. a minimum investment return of 5% per annum. A deterministic simulation, with varying scenarios for future investment return, does not provide a good way of estimating the cost of providing this guarantee. This is because it does not allow for the volatility of investment returns in each future time period or the chance that an extreme event in a particular time period leads to an investment return less than the guarantee. Stochastic modelling builds volatility and variability (randomness) into the simulation and therefore provides a better representation of real life from more angles.