OPTIONS EVALUATION USING MONTE CARLO SIMULATION

Vasile Bratian
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Vasile Bratian: Lucian Blaga University of Sibiu

Revista Economica, 2017, vol. 69, issue 4, 30-42

Abstract: The present paper evaluates derivative products as options, using Monte Carlo simulation for the support-asset. The Monte Carlo method is one of the most valuable and used methods in modern finance and with great applicability in the pricing of options. The support-asset used in our developments is the shares of Banca Transilvania SA. The Monte Carlo simulation is used by us to create scenarios on the random evolution of the support-asset, and the price of the option is determined using the Feynman-Kac theorem. We also consider that the price of the support-asset follows a stochastic process with a lognormal distribution.

Keywords: Monte Carlo simulation; Feynman Kac theorem; options price; brownian motion (search for similar items in EconPapers)
JEL-codes: C02 C15 G13 (search for similar items in EconPapers)
Date: 2017
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