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Monte Carlo simulations: from GBM to option pricing #43

@alphaville

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@alphaville

Option pricing can be done by Monte Carlo simulations and this can allow a better understanding of the Black-Scholes equation. It also allows to understand that the geometric Brownian motion is that the core of BSE. Verify that Monte-Carlo and BSE give (approximately) the same solution and do some additional experiments. For example, how many MC samples are needed to have a decent approximation? You can experiment with put calls too. You could also try importance sampling.

See: Geometric Brownian motion v4.pdf

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