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New micromachining techniques now provide us with the technology to fabricate reflex klystron oscillators with dimensions suitable for operation in the terahertz region of the electromagnetic spectrum. For the success of these devices, accurate designs are required since the optimization of certain parameters is critical to obtaining useful amounts of ac power. Classical models for device design have long been in existence, but these are no longer valid at terahertz frequencies. For this reason, we have developed a simulation tool, specifically aimed at the design of terahertz frequency reflex klystrons. The tool, based on the Monte Carlo algorithm, includes loss mechanisms and takes into account the main peculiarities expected for device operation at terahertz frequencies. In this study, the tool is used to study the influence of the electron beam aperture angle and cavity dimensions (particularly the grid spacing) on ac power generation. The results demonstrate that aperture angles of less than 10° are necessary for the optimization of output power. It is also found that the power output is highly sensitive to the distance between the grids.