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

Kód výsledku v IS VaVaI

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Výsledek na webu

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DOI - Digital Object Identifier

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Jazyk výsledku

angličtina

Název v původním jazyce

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

Popis výsledku v původním jazyce

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. .

Název v anglickém jazyce

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

Popis výsledku anglicky

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. .

Druh

D - Stať ve sborníku

CEP obor

AH - Ekonomie

OECD FORD obor

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Projekt

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Návaznosti

Z - Vyzkumny zamer (s odkazem do CEZ)

Rok uplatnění

2003

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název statě ve sborníku

Mezinárodní konference: Nové trendy rozvoje průmyslu

ISBN

80-214-2518-0

ISSN

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e-ISSN

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Počet stran výsledku

8

Strana od-do

1-8

Název nakladatele

VUT Brno

Místo vydání

Brno

Místo konání akce

Brno

Datum konání akce

26. 11. 2003

Typ akce podle státní příslušnosti

EUR - Evropská akce

Kód UT WoS článku

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