The application of Monte Carlo simulation in European call option pricing
- DOI
- 10.2991/icemeet-16.2017.184How to use a DOI?
- Keywords
- Monte Carlo simulation; option pricing; Wiener process
- Abstract
Monte Carlo simulation is an effective method to solve the problem of option pricing. This article introduces the definition of option, the classification of option according to different standards and methods to evaluate the option. Then it focuses on the problem of how to use the method of Monte Carlo simulation to solve the option valuation of the European call option. Next it analyzes the algorithm of Wiener process, the algorithm of stock price model, and the algorithm of European call option. Finally it changes some parameters to observe its effect on option valuation. This series of steps show how to use the Monte Carlo simulation method to value the option in detail. After reading this article, even if a beginner can have a preliminary understanding of the options, and write some relevant programs based on this article.
- Copyright
- © 2017, the Authors. Published by Atlantis Press.
- Open Access
- This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).
Cite this article
TY - CONF AU - Ze-Wei Zhang AU - Kun Liu AU - Zi-Xuan Cao AU - Zhuo Yang AU - Zi-Ting Luo AU - Zhi-Gang Zhang PY - 2017/01 DA - 2017/01 TI - The application of Monte Carlo simulation in European call option pricing BT - Proceedings of the 2016 2nd International Conference on Economics, Management Engineering and Education Technology (ICEMEET 2016) PB - Atlantis Press SP - 881 EP - 885 SN - 2352-5398 UR - https://doi.org/10.2991/icemeet-16.2017.184 DO - 10.2991/icemeet-16.2017.184 ID - Zhang2017/01 ER -