STOCK PRICE SIMULATION USING BOOTSTRAP AND MONTE CARLO

Martin Paå½ickã

Scientific Annals of Economics and Business (continues Analele Stiintifice), 2017, vol. 64, issue 2, 155 - 170

Abstract: In this paper, an attempt is made to assessment and comparison of bootstrap experiment and Monte Carlo experiment for stock price simulation. Since the stock price evolution in the future is extremely important for the investors, there is the attempt to find the best method how to determine the future stock price of BNP Paribas´ bank. The aim of the paper is define the value of the European and Asian option on BNP Paribas´ stock at the maturity date. There are employed four different methods for the simulation. First method is bootstrap experiment with homoscedastic error term, second method is blocked bootstrap experiment with heteroscedastic error term, third method is Monte Carlo simulation with heteroscedastic error term and the last method is Monte Carlo simulation with homoscedastic error term. In the last method there is necessary to model the volatility using econometric GARCH model. The main purpose of the paper is to compare the mentioned methods and select the most reliable. The difference between classical European option and exotic Asian option based on the experiment results is the next aim of tis paper. JEL Codes - C15, C51, C52, G11

Keywords: European option; Asian Option; bootstrap; Monte Carlo; stock price simulation; modeling volatility (search for similar items in EconPapers)
Date: 2017
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