Professional Documents
Culture Documents
This is a Computational Finance exercise on the use of the Monte Carlo scheme to price path
dependent options. The assignment tests an understanding of …rst and second term courses. It
has a weighting of 20% of the …nal score.
Submission 5pm Thursday 12 April 2018 on Moodle.
Task
Use the expected value of the discounted payo¤ under the risk-neutral density Q
h RT i
Q r d
V (S; t) = E e t Payo
for the appropriate form of payo¤, to consider:
a. Arithmetic Sampling - …xed and ‡oating strike; discrete and continuous sampling
b. Geometric Sampling - …xed and ‡oating strike; discrete and continuous sampling
In both cases use the Euler-Maruyama scheme for simulating the underlying stock price using
the following set of data
This is an open ended exercise, but your submission should centre on a short report and C++
code to include:
Results - appropriate tables, comparisons and error graphs (e.g. changing number of
simulations).