Monte Carlo Method for Pricing of Multi-Asset Rainbow Options

¬†When compared to other computer methods, the Monte Carlo method solution of the system stochastic differential equations in multidimensional instance offered numerous advantages. One of them is the possibility to solve boundary value issues at a single point (with accompanying processing savings), whereas deterministic approaches must simultaneously discover the answer at a large number of places. This trait is particularly important in problems such as option pricing, where the value of an option is only required at the moment of strike and for the current state of the market. In this study, we look at a multi-asset European option that is formally characterised by a system of stochastic differential equations. In this study, we use the Monte Carlo method’s well-known “Random walk on spheres” (Rwos) technique to quantitatively evaluate the pricing of multi-asset rainbow options and compare the results to other known results.

Author(s) Details:

A. Rasulov
University of World Economy and Diplomacy, Tashkent, Uzbekistan.

M. Rakhmatov,
University of World Economy and Diplomacy, Tashkent, Uzbekistan.

Please see the link here: https://stm.bookpi.org/RAMRCS-V10/article/view/6275

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