# Tag Archives: Simulation

## Option Pricing using Monte Carlo Simulation – Pricing Exotic & Vanilla Options in Excel – Introduction

Option pricing using Monte Carlo Simulation In our post on Option Pricing using Monte Carlo Simulation, we walk through a simple modeling framework used for pricing vanilla as well as exotic options in Excel. After the framework is introduced we drop a few hints on

## Exotic derivatives & Options pricing – Pricing Chooser and Compound Options – Weekend Challenge

Exotic Derivatives & Option pricing weekend challenge This week exotic option pricing challenge focuses on chooser and compound option pricing using Monte Carlo Simulation in Excel. Hints to the solution will be posted separately within the next 12 hours. Let’s see if you can crack

## Monte Carlo Simulation how to – Linking financial model to the simulation

Monte Carlo Simulation – Linking financial model to the simulation Since we have a model for simulating oil prices, we are now ready to link our oil price model to projected financial statements for the airline. To do this we need to figure out how

## Monte Carlo Simulation Model How to – First pass

Monte Carlo Simulation Model – How To – Simulating Crude Oil Prices To simulate crude oil prices we will follow a multi step process. We first present the input required and output produced from the simulation model and then follow with a step by step

## Monte Carlo Simulation Model – How To – Initial Ground Work

Monte Carlo Simulation Model How To Guide The Monte Carlo Simulation how to guide is a combination of session transcripts and class notes from a lecture on Monte Carlo Simulation applications. The lectures focused on building a solution for the fuel hedging problem for the

## Monte Carlo simulation methods – Tweaking the distribution

My love affair with Monte Carlo Simulation Let’s start with the honest truth. I had a torrid long distance love affair with Monte Carlo simulation over many years that ended up badly in a painful breakup. This is not going to be a neutral post.

## Dynamic Delta Hedging – Extending the Monte Carlo simulation model to Put contracts

Dynamic Delta Hedging – Monte Carlo Simulation in Excel for hedging European put contracts In our previous post on Dynamic Delta Hedging for European Call Options we built a simple simulation in model in Excel that simulated an underlying price series and a step by

## MonteCarlo Simulation: A introduction to simulating N(d1) and N(d2) in Excel.

Simulating the difference between N(d1) and N(d2) in Excel. Before you begin there are two Black Scholes background posts that you will find useful in deciphering the logic behind N(d1) and N(d2). The first deals with understanding the difference between the two Black Scholes probabilities.

## Monte Carlo Simulation – Simulating returns by replacing the normal distribution with historical returns

Monte Carlo Simulator Using Historical Returns – Simulating Commodity Prices Our course on Building Monte Carlo Simulators in Excel and related available-for-sale excel examples for Commodities, Currencies and Equities provide the groundwork for this EXCEL model. The model is an extension of the work done

## Simulation tools. Variance reduction techniques for option pricing models

Variance Reduction tools for Monte Carlo Simulation. Monte Carlo simulation techniques are a useful tool in finance for pricing options especially when there are a large number of sources of uncertainty (in modeling terms: state variables) involved. Unlike Black Scholes formula for which closed formed