Download or read book Use of the Monte Carlo Simulation in Valuation of European and American Call Options written by Gorica Malesevic and published by . This book was released on 2017 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis examines the valuation methods used for pricing European and American call options. Options are financial instruments that play an important role in the financial industry and are used in hedging, speculating and arbitraging. Because options are widely used in investing, there is a need for valuation methods that are as precise as possible. Options have been perceived as obscure financial instruments due to the lack of valuation techniques in the past. However, with the discovery of Black-Scholes Model in 1973, the first option valuation method, option trading escalated. In this thesis, the fair market value of S & P 500 index with European exercise style, The Google Option Contract and Apple Option Contract will be obtained bu using the Black-Scholes Model, the General Monte Carlo Simulation, The Combined Method and the Least-Square Monte Carlo. The results from three models with be compared and contrasted in order to determine the best valuation method.

Download or read book A Monte Carlo Method for Pricing American Options written by Diego Garcia and published by . This book was released on 1999 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Market Conform Valuation of Options written by Tobias Herwig and published by Taylor & Francis. This book was released on 2006-01-17 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: The focus of this volume is on the development of new approaches for the market-conform valuation of newly issued derivatives. The first chapter presents a flexible approach to construct the binomial process of the underlying asset price by using a simultaneously backward and forward induction algorithm. This framework can be used to price and hedge a wide range of plain-vanilla and exotic options. In the second chapter this new approach is compared to existing models using a sample of plain-vanilla options, American call options and European Barrier options from two competing markets. In the third chapter new methods to value American-style options via Monte Carlo simulations in accordance with given market prices are discussed. After a short introduction to Monte Carlo methods, two new approaches are proposed. These new frameworks are illustrated via pricing examples for standard American put options.

Download or read book Valuation of American Options written by David Animante and published by . This book was released on 2016 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: The use of American style equity options as hedging instrument has gained currency in recent times. This phenomenon devolves from the ever-expanding need by individuals, corporations and governments to hedge away their financial risks and the clarion call for derivative securities that give the holder increased flexibility in exercise. Nevertheless, pricing American options is complex and there exists no analytic solution to the problem except a profusion of approximation and finite difference techniques. Indeed, many researchers have shown that these methods cannot handle multifactor situations where the underlying asset follows a jump-diffusion process and where the derivative security depends on multiple sources of uncertainty such as stochastic volatility, stochastic interest rate among others. Monte-Carlo simulation techniques therefore developed out of the search for a pricing formula that has the capacity to accommodate all forms of uncertainty and at the same time able to produce speedy and accurate results. Some scholars at first rejected these techniques as yielding inaccurate results but in recent times, many researchers have demonstrated the efficacy of Monte-Carlo simulation in option pricing. The aim of this study is to assess the effectiveness of Monte-Carlo simulation methods in comparison with other option pricing techniques. To achieve this objective, the research builds an algorithm to compute Call and Put prices based on a wide range of input parameters. It also develops a model where volatility or interest rate is stochastic and a deterministic function of time. The results indicate that Monte-Carlo simulation techniques produce option values and exercise boundaries that are very similar to the Binomial, Barone-Adesi and Whaley as well as the Explicit Finite Difference methods. The results also show that the stochastic volatility and stochastic interest rate models yield slightly different but more accurate results. Consequently, the study recommends simulation techniques that incorporate multiple sources of uncertainty simultaneously for fast, efficient and more accurate option pricing.

Download or read book Monte Carlo Simulation for Valuation of American Options written by Marcus Muncan and published by . This book was released on 2006 with total page 164 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Pricing American Options Using Monte Carlo Simulation written by Victoria Zhanna Averbukh and published by . This book was released on 1997 with total page 138 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Monte Carlo Methods in Financial Engineering written by Paul Glasserman and published by Springer Science & Business Media. This book was released on 2013-03-09 with total page 603 pages. Available in PDF, EPUB and Kindle. Book excerpt: From the reviews: "Paul Glasserman has written an astonishingly good book that bridges financial engineering and the Monte Carlo method. The book will appeal to graduate students, researchers, and most of all, practicing financial engineers [...] So often, financial engineering texts are very theoretical. This book is not." --Glyn Holton, Contingency Analysis

Download or read book Real Options Analysis Course written by Johnathan Mun and published by John Wiley & Sons. This book was released on 2003-04-15 with total page 321 pages. Available in PDF, EPUB and Kindle. Book excerpt: Praise for Real Options Analysis Course "Dr. Mun's latest book is a logical extension of the theory and application presented in Real Options Analysis. More specifically, the Real Options Analysis Course presents numerous real options examples and provides the reader with step-by-step problem-solving techniques. After having read the book, readers will better understand the underlying theory and the opportunities for applying real option theory in corporate decision-making." -Chris D. Treharne, President, Gibraltar Business Appraisals, Inc. "This text provides an excellent follow up to Dr. Mun's first book, Real Options Analysis. The cases in Real Options Analysis Course provide numerous examples of how the use of real options and the Real Options Analysis Toolkit software can assist in the valuation of strategic and managerial flexibility in a variety of arenas." -Charles T. Hardy, PhD, Chief Financial Officer & Director of Business Development, Panorama Research, Inc. "Most of us come to real options from the perspective of our own areas of expertise. Mun's great skill with this book is in making real options analysis understandable, relevant, and immediately applicable to the field within which you are working." -Robert Fourt, Partner, Gerald Eve (UK) "Mun provides a practical step-by-step guide to applying simulation and real options analysis-invaluable to those of us who are no longer satisfied with conventional valuation approaches alone." -Fred Kohli, Head of Portfolio Management, Syngenta Crop Protection Ltd. (Switzerland)

Download or read book Option Pricing Using Monte Carlo Methods written by Junxiong Wang and published by . This book was released on 2011 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This project is devoted primarily to the use of Monte Carlo methods to simulate stock prices in order to price European call options using control variates, and to the use of the binominal model to price American put options. At the end, we can use the information to form a portfolio position using an Interactive Brokers paper trading account. This project was done as a part of the masters capstone course Math 573: Computational Methods of Financial Mathematics.

Download or read book An Introduction to Financial Option Valuation written by Desmond J. Higham and published by Cambridge University Press. This book was released on 2004-04-15 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a lively textbook providing a solid introduction to financial option valuation for undergraduate students armed with a working knowledge of a first year calculus. Written in a series of short chapters, its self-contained treatment gives equal weight to applied mathematics, stochastics and computational algorithms. No prior background in probability, statistics or numerical analysis is required. Detailed derivations of both the basic asset price model and the Black–Scholes equation are provided along with a presentation of appropriate computational techniques including binomial, finite differences and in particular, variance reduction techniques for the Monte Carlo method. Each chapter comes complete with accompanying stand-alone MATLAB code listing to illustrate a key idea. Furthermore, the author has made heavy use of figures and examples, and has included computations based on real stock market data.

Download or read book Monte Carlo Estimation of American Call Options on the Maximum of Several Stocks written by Steven B. Raymar and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Among numerical methods for valuing derivatives, lattice- based models like the binomial are useful for pricing American options, but have difficulty with path dependent contracts. Monte Carlo simulation is good for path- dependent problems, but has trouble with American early exercise. And for all methods, computation time increases sharply when there is more than one stochastic variable. Yet derivative instruments with all of these difficult features are being created daily, an example is an American option on the maximum of several stock prices. In this article, Raymar and Zwecher present an enhanced Monte Carlo technique designed to handle these problems. Their method is fast and accurate in basic cases and can be used easily on much more complex options, like a call on the maximum of ten stocks. The biggest problem in assessing its performance on the most difficult cases is that there are no benchmarks available for accuracy; the Raymar and Zwecher technique solves valuation problems that no other approach can touch.

Download or read book Monte Carlo Simulation and Finance written by Don L. McLeish and published by John Wiley & Sons. This book was released on 2011-09-13 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: Monte Carlo methods have been used for decades in physics, engineering, statistics, and other fields. Monte Carlo Simulation and Finance explains the nuts and bolts of this essential technique used to value derivatives and other securities. Author and educator Don McLeish examines this fundamental process, and discusses important issues, including specialized problems in finance that Monte Carlo and Quasi-Monte Carlo methods can help solve and the different ways Monte Carlo methods can be improved upon. This state-of-the-art book on Monte Carlo simulation methods is ideal for finance professionals and students. Order your copy today.

Download or read book American Option Valuation Using Monte Carlo Simulation written by Keng Leong Yeo and published by . This book was released on 2002 with total page 126 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Numerical Methods in Finance written by René Carmona and published by Springer Science & Business Media. This book was released on 2012-03-23 with total page 478 pages. Available in PDF, EPUB and Kindle. Book excerpt: Numerical methods in finance have emerged as a vital field at the crossroads of probability theory, finance and numerical analysis. Based on presentations given at the workshop Numerical Methods in Finance held at the INRIA Bordeaux (France) on June 1-2, 2010, this book provides an overview of the major new advances in the numerical treatment of instruments with American exercises. Naturally it covers the most recent research on the mathematical theory and the practical applications of optimal stopping problems as they relate to financial applications. By extension, it also provides an original treatment of Monte Carlo methods for the recursive computation of conditional expectations and solutions of BSDEs and generalized multiple optimal stopping problems and their applications to the valuation of energy derivatives and assets. The articles were carefully written in a pedagogical style and a reasonably self-contained manner. The book is geared toward quantitative analysts, probabilists, and applied mathematicians interested in financial applications.

Download or read book American Option Valuation Using Monte Carlo Simulation Under a Regime switching Framework written by Javier Alberto Hernandez and published by . This book was released on 2010 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Monte Carlo Methods in Finance written by Peter Jäckel and published by John Wiley & Sons. This book was released on 2002-04-03 with total page 245 pages. Available in PDF, EPUB and Kindle. Book excerpt: An invaluable resource for quantitative analysts who need to run models that assist in option pricing and risk management. This concise, practical hands on guide to Monte Carlo simulation introduces standard and advanced methods to the increasing complexity of derivatives portfolios. Ranging from pricing more complex derivatives, such as American and Asian options, to measuring Value at Risk, or modelling complex market dynamics, simulation is the only method general enough to capture the complexity and Monte Carlo simulation is the best pricing and risk management method available. The book is packed with numerous examples using real world data and is supplied with a CD to aid in the use of the examples.

Download or read book Monte Carlo Methods for American Option Pricing written by Alberto Barola and published by LAP Lambert Academic Publishing. This book was released on 2014-05-21 with total page 160 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Monte Carlo approach has proved to be a valuable and flexible computational tool in modern finance. A number of Monte Carlo simulation-based methods have been developed within the past years to address the American option pricing problem. The aim of this book is to present and analyze three famous simulation algorithms for pricing American style derivatives: the stochastic tree; the stochastic mesh and the least squares method (LSM). The author first presents the mathematical descriptions underlying these numerical methods. Then the selected algorithms are tested on a common set of problems in order to assess the strengths and weaknesses of each approach as a function of the problem characteristics. The results are compared and discussed on the basis of estimates precision and computation time. Overall the simulation framework seems to work considerably well in valuing American style derivative securities. When multi-dimensional problems are considered, simulation based methods seem to be the best solution to estimate prices since the general numerical procedures of finite difference and binomial trees become impractical in these specific situations.