I have to implement option pricing in c++ using Markov chain Monte Carlo. Is there some paper which describes this in detail so that I can learn from there and implement?

  • $\begingroup$ Assume you've looked at en.wikipedia.org/wiki/Markov_chain_Monte_Carlo ? $\endgroup$
    – user59
    Commented Oct 10, 2011 at 2:27
  • $\begingroup$ Hi Shane, welcome to quant.SE and thanks for posting your question. Please consider registering to better track the progress of your question. @barrycarter I assume Shane wants a specific reference for implementing MCMC to option pricing. $\endgroup$ Commented Oct 10, 2011 at 13:38

3 Answers 3


I believe this is a nice paper for you to start with. Check out what references it cited and who cited it.

Markov Chain Monte Carlo Analysis of Option Pricing Models
"Use the Markov Chain Monte Carlo (MCMC) method to investigate a large class of continuous-time option pricing models. These include: constant-volatility, stochastic volatility, price jump-diffusions and volatility jump-diffusions. We propose a new Bayesian method for estimation and model selection, the “Mixture Model MCMC” algorithm."

  • $\begingroup$ Hi Alchemist, welcome to quant.SE and thanks for posting the paper (is it your paper?). The paper, though, is still largely a work in progress and, as of yet, doesn't really cover the details of implementation. Still, particularly if this is your paper, I'd encourage you to continue looking around the site and contribute. $\endgroup$ Commented Oct 11, 2011 at 16:37

Check this document out: link to pdf file

Also, if you are concerned with actual performance of your code and want to implement efficient code then gsl libraries would be the first place look at: link. It's got everything you need.


Here are a few more papers about MCMC and alike methods for derivative pricing and co. :

Blanchet-Scalliet, Patras - Counterparty risk valuation for CDS

Jasra, Del Moral - Sequential Monte Carlo Methods for Option Pricing

Frey, Schmidt - Filtering and Incomplete Information in Credit Risk

Peters, Briers, Shevchenko, Doucet - Calibration and Filtering for Multi Factor Commodity Models with Seasonality, Incorporating Panel Data from Futures Contracts

Rambharat, Brockwell - SMC Pricing of American-style Options under Stochastic Volatility Models

Most of those papers are available online (mostly on Arxiv)



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