The Efficiency of QMC and its Usefulness in Pricing and Hedging of Options

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F61989100%3A27510%2F03%3A00007679" target="_blank" >RIV/61989100:27510/03:00007679 - isvavai.cz</a>
Result on the web
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DOI - Digital Object Identifier
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Result language
angličtina
Original language name
The Efficiency of QMC and its Usefulness in Pricing and Hedging of Options
Original language description
In practice hedgers very often use options with non-standard pay-offs. Classical pricing formulas of Black-Scholes types are therefore not applicable. In this case we can take an advantage of any numerical method. Clearly, the method must be used not only to price these options but also to hedge them. In this paper we study an alternative to Monte Carlo method - Quasi Monte Carlo simulation as a tool to detect right hedge ratios. Classical Monte Carlo simulation is based on generating pseudorandom numbers to simulate underlying asset price evolution. On the other hand using Quasi Monte Carlo we generate numbers in a more uniform sequence, rather deterministic than random, also known as low-discrepancy sequences. The advantage for pricing is well known.In this paper we are interested in effectiveness of QMC in detecting of hedge parameters. In order to compare both methods with classical BS formula we need to apply them on standard option, in particular plain vanilla call. .
Czech name
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Czech description
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Publication year
2003
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Article name in the collection
Mezinárodní konference: Nové trendy rozvoje průmyslu
ISBN
80-214-2518-0
ISSN
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e-ISSN
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Number of pages
8
Pages from-to
1-8
Publisher name
VUT Brno
Place of publication
Brno
Event location
Brno
Event date
Nov 26, 2003
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
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