# Questions tagged [monte-carlo]

Monte Carlo simulation methods are a broad class of computational algorithms that rely on repeated random sampling to obtain numerical results.

421 questions
Filter by
Sorted by
Tagged with
46 views

### Pricing of put option with Black Scholes & Monte Carlo simulation [closed]

I have the following problem with a put option in a black scholes setting. Consider a put option with time to maturity $T = 1$ and the underlying return $R$ following the log-normal model with ...
52 views

### When pricing with Monte Carlo using market prices, should we use only the first price or all the prices to create the paths?

I have a vector $S=(S_0,S_1,...)$ of monthly oil spot prices and for each of them I have to compute, using Monte Carlo, the price of the forward contract having it as underlying asset. The equation ...
166 views

### How to perform Monte Carlo simulations to price a Forward contract under the Schwartz mean reverting model?

Objective: (1) Implement the Euler Explicit Method for solving the PDE for option prices under the Schwartz mean reverting model. (2) Compare with a Monte Carlo simulation. I'm stuck with point 1 (...
59 views

### Heston Discretization dt

I’m trying to figure out the discretization of the Heston model. In the choice of dt, I have seen several ways that people specify this number. Would it not just be ...
40 views

### Simulation of price ratios

How to go about simulations of variables like price-to-book or dividend yield? Basically I would like to do a simulation based testing of an investing strategy (other than historical simulation). It’s ...
75 views

### Cox-Ingersoll-Ross: Monte Carlo Simulation

I am trying to build a Monte Carlo simulation in Excel (yes, far from optimal) for valuation of a callable bond. I have some experience with MC simulation on path dependent derivatives with stocks as ...
59 views

### Issue in Pricing Binary Options using Heaviside Function and QuantLib Python

I am trying to price binary option using MC Simulation and Python QuantLib Library. The price of the option matches with the Analytical Engine. However, I am not sure how to incorporate the Heaviside ...
33 views

### Issue in Pricing Barrier Options using MCBarrierEngine in QuantLib Python

Extremely sorry for bugging the community again, but I am struggling with finding proper documentation of QuantLib Python. I am trying to price Barrier Option using MC Simulation. Here is the code: <...
46 views

### Which infinite activity Levy process is the most popular for option pricing

Hey I heard about different Levy processes with infinite activity like VG, NIG, Meixner or CGMY process, but which proccesses are the most popular? And which processes can be simulated (as simple as ...
102 views

42 views

### Simulate correlated Brownian motions conditioned on future state(s)

Consider a model defined by 2 geometric Brownian motions $$dY_{1}(t) = \sigma_{2} Y_{1}(t)dW_{1}(t)$$ $$dY_{2}(t) = \sigma_{2} Y_{2}(t)dW_{2}(t)$$ with $Y_{1}(0) = y_{1}$, $Y_{2}=y_{2}$ and \$dW_{1}(...
26 views

### Term structure of interest rate model calibration

I need to model term structure of interest rate and predict the zero curve. The database I am using to calibrate the model contains zero rate observations for approximately 10 years and for 37 ...
16 views

### Introducing initial lockout period for American-Asian options pricing in R

Currently attempting to price American-Bermuda-Asian call options using Monte Carlo simulations as done in Longstaff and Schwartz (2001). The options have an initial lockout period of 3 months, ...
13 views

### Finding fifth and sixth polynomials for Headrick (2002) method for non-normal multivariate distribution

I am trying to perform a 3-asset class return Monte Carlo simulation. As the asset class returns are non-normal, I found the following function rHeadrick from the ...
71 views

### Cholesky correlation

I have historic time series for spot and futures and I want to now simulate future price paths for 1 day to get the distribution and from there compute the value at risk. My question is now since i am ...
36 views

### Value at Risk with Monte Carlo using DCC-Garch in R

So I was trying to compute the 1- day Value at Risk of a hedge portfolio (consisting of 1 stock and one future) with a DCC-Garch model in R. So what I did is since I had historical data of 10 years: ...