3. Create a spreadsheet modeling trajectories of geometric Brownian motion starting at 100 with a growth...
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3. Create a spreadsheet modeling trajectories of geometric Brownian motion starting at 100 with a growth rate of 5 percent, which is also a risk-free rate, and volatility of 30 percent. Make a spreadsheet that calculates European call maturing in 1 year with the strike of 100 on a non- dividend-paying stock using the Monte-Carlo method and using 20,000 trajectories with 250 steps per year in each trajectory. Compare Monte-Carlo price with 20,000 trajectories to a theoretical model price. Calculate with 50,000 trajectories. Compare Monte-Carlo price with 50,000 trajectories to theoretical model price. 3. Create a spreadsheet modeling trajectories of geometric Brownian motion starting at 100 with a growth rate of 5 percent, which is also a risk-free rate, and volatility of 30 percent. Make a spreadsheet that calculates European call maturing in 1 year with the strike of 100 on a non- dividend-paying stock using the Monte-Carlo method and using 20,000 trajectories with 250 steps per year in each trajectory. Compare Monte-Carlo price with 20,000 trajectories to a theoretical model price. Calculate with 50,000 trajectories. Compare Monte-Carlo price with 50,000 trajectories to theoretical model price.
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Here is the spreadsheet I created with Monte Carlo simulations to price a European call option Stoch... View the full answer
Related Book For
Financial Accounting Theory
ISBN: 9780134166681
8th Edition
Authors: William R. Scott, Patricia O'Brien
Posted Date:
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