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Pricing arithmetic average options and basket options using Monte Carlo and Quasi-Monte methods

Author

Listed:
  • Maria Giuseppina Bruno

    (Department of Methods and Models for Economics, Territory and Finance, Sapienza University of Rome (Italy))

  • Antonio Grande

    (Department of Methods and Models for Economics, Territory and Finance, Sapienza University of Rome (Italy))

Abstract

In the present paper, we address the evaluation problem of multidimensional financial options. We apply in particular the Monte Carlo and Sobol QuasiMonte Carlo numerical integration for pricing asian arithmetic average options and basket options and we show some numerical exemplifications in 4 and 12 dimensions. The paper is the occasion to furtherly test the algorithm for computing the quantile function of the standard gaussian distribution proposed by the authors in a previous publication.

Suggested Citation

  • Maria Giuseppina Bruno & Antonio Grande, "undated". "Pricing arithmetic average options and basket options using Monte Carlo and Quasi-Monte methods," Working Papers 143/15, Sapienza University of Rome, Metodi e Modelli per l'Economia, il Territorio e la Finanza MEMOTEF.
    • Handle: RePEc:rsq:wpaper:34/15
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    References listed on IDEAS

    as
    1. Maria Giuseppina Bruno & Antonio Grande, "undated". "Un nuovo algoritmo di inversione della distribuzione normale standardizzata e sue applicazioni finanziarie," Working Papers 131/14, Sapienza University of Rome, Metodi e Modelli per l'Economia, il Territorio e la Finanza MEMOTEF.
    2. Okten, Giray & Eastman, Warren, 2004. "Randomized quasi-Monte Carlo methods in pricing securities," Journal of Economic Dynamics and Control, Elsevier, vol. 28(12), pages 2399-2426, December.
    3. Piergiacomo Sabino, 2009. "Efficient quasi-Monte simulations for pricing high-dimensional path-dependent options," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 32(1), pages 49-65, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Monte Carlo and Quasi-Monte Carlo numerical integration; Multidimensional financial options; Sobol low discrepancy sequences; Quantile function.;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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