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If I wish to price an option with Monte Carlo using the standard GBM process, which have payoff

$(max(S-K,0))^2$

Why is it not suitable for a non-linear payoff?

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  • $\begingroup$ Note: the squared term is always positive, so the $max$ part is superfluous $\endgroup$ – dm63 Jul 10 '18 at 13:59
  • $\begingroup$ @dm63 yes you are right, I meant the squared bracket outside the MAX function. Will edit. Thanks for letting me know $\endgroup$ – RothNorth Jul 11 '18 at 8:28
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    $\begingroup$ First this is a poorly worded question. How does one know what "it" is, without reading the title? Second, from what source do you allege "it" is not suitable? $\endgroup$ – Hans Jul 12 '18 at 1:29

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