American, Asian, European and barrier option pricing based on BSM model or Monte Carlo simulation
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After inputting basic parameters (e.g. k, s, r, sig(vol), dt), this project can give users option price for different types of options. To build the models, I have quoted some theories and formulas, including Black Scholes Option Pricing Model and Monte Carlo Simulations
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Now, the following types of options are available:
(1) American option (2) Asian option (3) European option (4) Barrier option
Python 3.X should be installed on your machine.
Import different files to run the code:
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American option:
(1) BSM Model with Least Squares Monte Carlo:
<from American_option import american_option_lsm> -
Asian option:
(1) Monte Carlo simulation
<from Asian_option import asian_option_mc> -
European option:
(1) BSM Model
<from European_option import black_scholes_model>
(2) Monte Carlo simulation
<from European_option import monte_carlo_simulation> -
Barrier option:
(1)BSM Model
<from barrier_option import bsm_barrier_option>
(2) Monte Carlo simulation
<from barrier_option import mc_barrier_option>
GlassermanPaul. (2003). Monte Carlo Methods in Financial Engineering. New York: Springer.
Haug, E. G. (2018). The Complete Guide to Option Pricing Formulas (2nd ed.). Shanghai: Mc Graw Hill Education.
Hull, J. (2014). Options, Futures and Other Derivatives (9th ed.). Beijing: China Machine Press
Longstaff, F., Longstaff, F. A., Schwartz, E., & Schwartz, E. S. (2001). Valuing American options by simulation: a simple least-squares approach. Review of Financial Studies, 14(1). https://doi-org.uoelibrary.idm.oclc.org/10.1093/rfs/14.1.113
Xiao, Y.W. (2019). Essentials of Stochastic Calculus for Finance. Shanghai: Fudan University Press.
Zhang, G.P. (2014). Exotic Options: A Guide to Second Generation Options. Beijing: China Machine Press.
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