Research Article
Monte Carlo Simulation for Option Pricing with Multiple Assets
@INPROCEEDINGS{10.4108/eai.17-6-2022.2322853, author={Qinwen Deng and Hongying Wu and Yang Wu and Zhiqiang Zhou}, title={Monte Carlo Simulation for Option Pricing with Multiple Assets}, proceedings={Proceedings of the International Conference on Information Economy, Data Modeling and Cloud Computing, ICIDC 2022, 17-19 June 2022, Qingdao, China}, publisher={EAI}, proceedings_a={ICIDC}, year={2022}, month={10}, keywords={multi-asset options monte carlo simulation normal distribution correlative coefficient}, doi={10.4108/eai.17-6-2022.2322853} }- Qinwen Deng
Hongying Wu
Yang Wu
Zhiqiang Zhou
Year: 2022
Monte Carlo Simulation for Option Pricing with Multiple Assets
ICIDC
EAI
DOI: 10.4108/eai.17-6-2022.2322853
Abstract
It is a challenged topic of option pricing with multi-asset. This paper uses Monte Carlo (MC) simulation to valuate options which possess multiple assets. Firstly, given correlative coefficients, an algorithm to generate normal distributed random variables is established. Then, MC scheme is proposed for pricing European, American, Asian and Lookback options. Numerical experiments illustrate that MC simulation is an efficient and accurate method. With MC path number 8000, the relative errors of numerical European options are less than 0.5%. The stability experiments of MC algorithm are also carried out. As an advantage, the proposed MC algorithm can be extended to more general options such as Strangles and CEV options.
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