What is your statistical background and previous experience with simulation methods in statistics? From your questions, it sounds like you need to start with simpler situations to better unerstand the main ideas. Try reading about using simulation to estimate the power of a statistical test and Monte Carlo methods for contingency tables in SAS.
Also what is the application here? Are you merely intellectually curious about the details of the algorithm? Or do you need to implement a similar algoithm in a different situation?
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