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In this chapter we introduce the Monte Carlo method and its various applications. In option pricing, the option price is expressed as an expectation of a random variable representing a payoff. Thus we generate sufficiently many asset price paths using random number generators, and evaluate the average of the payoff.

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The Monte Carlo Method

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  • 发表日期：

    2026年

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  • Geon Ho Choe

摘要

In this chapter we introduce the Monte Carlo method and its various applications. In option pricing, the option price is expressed as an expectation of a random variable representing a payoff. Thus we generate sufficiently many asset price paths using random number generators, and evaluate the average of the payoff.