Research Article
The Comparison of European and Asian Option Based on Monte Carlo Simulation
@INPROCEEDINGS{10.4108/eai.28-10-2022.2328406, author={Zhiqing Bai}, title={The Comparison of European and Asian Option Based on Monte Carlo Simulation}, proceedings={Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-30, 2022, Shenzhen, China}, publisher={EAI}, proceedings_a={FFIT}, year={2023}, month={4}, keywords={asian option; european option; monte carlo simulation}, doi={10.4108/eai.28-10-2022.2328406} }- Zhiqing Bai
Year: 2023
The Comparison of European and Asian Option Based on Monte Carlo Simulation
FFIT
EAI
DOI: 10.4108/eai.28-10-2022.2328406
Abstract
Option is a new financial concept that was invented in the 1970s, which grew rapidly and became an important financial instrument in the market. This paper utilized Monte Carlo simulation in terms of the Black-Scholes model and Excel to investigate two types of options: the Asian Option and the European Option. It contains three stocks to analyze: GGOGL, TSLA, and AAPL. Horizontally comparing three variables based on linear regression and sensitivity analysis, the outcome shows clearly the linear relationship between the three factors (i.e., volatility, risk rate, and strike price. By comparing the Asian Option with the European Option, the features of the two types of options are demonstrated accordingly. These results shed light on guiding further explorations of the investment in options.