Download presentation

Presentation is loading. Please wait.

Published byReese Cooksley Modified about 1 year ago

1
Multi-asset options

2
Pricing model

3
Ito lemma

4

5
Continuous dividend case

6
American style

7
Exchange option

8
similarity reduction

9
Reduced model

10
Closed form solution

11
Other examples

12
Options on many underlying

13

14
Ito Lemma

15

16
Quanto options

17

18

19

20

21
Binomial model

22
Determination of p1,p2,p3,p4 see Kwok (1998) [pp ]

23
Monte-Carlo Simulation Monte-Carlo simulation is based on the risk- neutral valuation result. The expected payoff in a risk-neutral world is calculated using a sampling procedure. It is then discounted at the risk-free interest rate.

24
1. Sample a random path for in a risk-neutral world. 2. Calculate the payoff from the derivative. 3. Repeat steps one and two to get many sample values of the payoff from the derivative in a risk- neutral world. 4. Calculate the mean of the sample payoffs to get an estimate of the expected payoff in a risk-neutral world. 5. Discount the expected payoff at the risk-free rate to get an estimate of the value of the derivative.

25

Similar presentations

© 2016 SlidePlayer.com Inc.

All rights reserved.

Ads by Google