Mathematical Finance: Option Pricing using Monte Carlo Simulators
In addition to the Black Scholes Equation and binomial trees another important tool in option pricing is Monte Carlo Simulation. A Monte Carlo Simulator in Excel uses the inbuilt Random function in excel to model uncertainty. The Monte Carlo (MC) Simulator uses standardized mathematical finance equations to simulate the price of an equity, a currency, an exchange rate or a commodity. The prices are then used to calculate payoffs and the payoffs are sampled and averaged over a large enough pool to estimate simulated prices.
Here are introductory course on Monte Carlo Simulation. In addition to option pricing we will also use the same tool in interest rate simulations and multiple other financial simulators to be used later on in our mathematical finance curriculum.
Mathematical Finance: Building your first Monte Carlo (MC) simulator model for simulated equity prices in Excel
Mathematical Finance: Extending MC simulation for currencies and commodities
Mathematical Finance: Monte Carlo (MC) Simulation method: Understanding drift, diffusion and volatility drag
Mathematical Finance: Linking Monte Carlo Simulation, Binomial Trees and Black Scholes Equation
Mathematical Finance: Simulating Interest Rates using trees and Monte Carlo Simulation
If you would like to purchase and download the excel examples covered in this course, please checkout our online mathematical finance course store for handy pdf course cheat sheet downloads and solved excel spreadsheets and templates. If you need an option and derivatives product refresher, please see the introductory and intermediate courses below on Derivatives and Options products
- The Derivatives Short Course for Dummies
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Derivatives for Dummies – a first look at options and derivatives
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A quick look at basic concepts and vanilla options as well as synthetic manufacturing of options at a higher level of detail. The Derivatives for dummies crash course is followed by an intermediate level course that reviews product variation and basic pricing concepts.
Options Training: Options and derivatives crash course: Terminology
Options Training: Options and Derivatives Crash Course: Forward, Futures and Options
Options Training: Options and Derivatives Crash Course: Payoff profiles – Forwards
Options Training: Options and Derivatives Crash Course: Payoff profiles – Options, Calls and Puts
Options Training: Options and Derivatives Crash Course: Synthetics
Derivative products
The second course on derivatives and options products digs a little deeper into products, pricing, sensitivities and product variations over ten easy to read chapters. Starting again from vanilla products we touch upon options on currencies and Forex, options on interest rates, forwards, futures an Interest Rate Swaps.
Options Training: Options and Derivative Products: Review
Options Training: Options and Products: Vanilla products
Options Training: Options and Derivative Products: Pricing Basics
Options Training: Options and Derivative Products: Greeks and Binomial Trees
Options Training: Options and Derivative products: Exotic Options
Options Training: Options and Derivative products: Options on rates
Options Training: Options and Derivative Products: Forwards
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