Numerical Simulation for Multi-asset Derivatives Pricing Under Black-Scholes Model

Farshid Mehrdoust, Kianoush Fathi Vajargah and Asghar Rahimi
* Author for corresponding; e-mail address: far.mehrdoust@gmail.com
Volume: Vol.40 No.4 (OCTOBER 2013)
Research Article
DOI:
Received: 23 November 2012, Revised: -, Accepted: 2 April 2013, Published: -

Citation: Mehrdoust F., Vajargah K.F. and Rahimi A., Numerical Simulation for Multi-asset Derivatives Pricing Under Black-Scholes Model, Chiang Mai Journal of Science, 2013; 40(4): 725-735.

Abstract

Options are one of the most important financial instruments for risk management and option pricing is a well known problem in financial mathematics. In this paper, we simulate the multi-asset option price using the Monte Carlo method with variance reduction techniques. Several examples are given to illustrate the use of Mean Monte Carlo method, and to observe the variance reduction achieved compare to the crude Monte Carlo.

Keywords: Multi-asset options, European option pricing, Monte Carlo, Variance reduction, Black-Scholes model

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