Extending MC simulation models to Currencies & Commodities
Extending the original Monte Carlo (MC) Simulator for Equities to Currencies and Commodities required a few simple changes. Rather than using just r, we now use an adjusted r for the model.
In the case of currencies the adjusted yield is the interest rate differential between the domestic and foreign currencies. In the case of commodities the yield on the commodity is net of the convenience yield for the commodity.