OPTIONS EVALUATION USING MONTE CARLO SIMULATION

BRATIAN Vasile, Lucian Blaga University of Sibiu

Abstract:
The present paper evaluates derivative products as options, using Monte Carlo simulation for the support-asset. The Monte Carlo method is one of the most valuable and used methods in modern finance and with great applicability in the pricing of options. The support-asset used in our developments is the shares of Banca Transilvania SA. The Monte Carlo simulation is used by us to create scenarios on the random evolution of the support-asset, and the price of the option is determined using the Feynman-Kac theorem. We also consider that the price of the support-asset follows a stochastic process with a lognormal distribution.

Keywords: Monte Carlo simulation, Feynman Kac theorem, options price, brownian motion

JEL Classification: C02, C15, G13

Volume: 69, Issue: 4

Pages: 30 - 42

Publication date: November, 2017

Download the article: http://economice.ulbsibiu.ro/revista.economica/archive/69403bratian.pdf

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