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    HW 12

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    api-463579132
    This document contains code to price down-and-out barrier put options using two different Monte Carlo simulation methods: control variates and quasi-random Halton sequences. The control variates method generates asset paths, calculates payoffs if the barrier is not crossed or payoffs of 0 if crossed, fits a normal distribution to estimate the price and provides the price, confidence interval and number of crossings. The Halton sequence method similarly generates paths using quasi-random numbers, calculates payoffs and estimates the price while also reporting the number of crossings.

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    HW 12

    Uploaded by

    api-463579132
    45 views3 pages
    This document contains code to price down-and-out barrier put options using two different Monte Carlo simulation methods: control variates and quasi-random Halton sequences. The control variates method generates asset paths, calculates payoffs if the barrier is not crossed or payoffs of 0 if crossed, fits a normal distribution to estimate the price and provides the price, confidence interval and number of crossings. The Halton sequence method similarly generates paths using quasi-random numbers, calculates payoffs and estimates the price while also reporting the number of crossings.

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    This document contains code to price down-and-out barrier put options using two different Monte Carlo simulation methods: control variates and quasi-random Halton sequences. The control variates method generates asset paths, calculates payoffs if the barrier is not crossed or payoffs of 0 if crossed, fits a normal distribution to estimate the price and provides the price, confidence interval and number of crossings. The Halton sequence method similarly generates paths using quasi-random numbers, calculates payoffs and estimates the price while also reporting the number of crossings.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    45 views3 pages

    HW 12

    Uploaded by

    api-463579132
    This document contains code to price down-and-out barrier put options using two different Monte Carlo simulation methods: control variates and quasi-random Halton sequences. The control variates method generates asset paths, calculates payoffs if the barrier is not crossed or payoffs of 0 if crossed, fits a normal distribution to estimate the price and provides the price, confidence interval and number of crossings. The Halton sequence method similarly generates paths using quasi-random numbers, calculates payoffs and estimates the price while also reporting the number of crossings.

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    % DOPutMCAV.

    m %use control variates to price barrier


    options
    function [P,CI,NCrossed] =
    DOPutMCAV(S0,X,r,T,sigma,Sb,NSteps,NRepl)

    % Generate asset paths


    Payoff = zeros(NRepl,1);
    Payoff1 = zeros(NRepl,1);
    Payoff2 = zeros(NRepl,1);
    NCrossed = 0;

    for i=1:NRepl
    Path =
    (AssetPaths1(S0,r,sigma,T,NSteps,1)+AssetPaths1(S0,r,-
    sigma,T,NSteps,1))/2;
    crossed = any(Path <= Sb);
    if crossed == 0
    Payoff(i) = max(0, X - Path(NSteps+1));
    else
    Payoff(i) = 0;
    NCrossed = NCrossed + 1;
    end
    end
    [P,aux,CI] = normfit( exp(-r*T) * Payoff);

    >> CompDOPutMCAV

    DOPutMCAV =

    1.9195

    CI =

    1.8942
    1.9448

    NCrossed =

    >>
    %DoPutHalton.m
    %pricing down and out Put using HaltonPaths
    function Price =
    DoPutHalton(S0,X,r,T,sigma,NPoints,Base1,Base2,Sb)
    nuT = (r - 0.5*sigma^2)*T;
    siT = sigma * sqrt(T);

    % Use Box Muller to generate standard normals


    H1 = GetHalton(ceil(NPoints/2),Base1);
    H2 = GetHalton(ceil(NPoints/2),Base2);

    VLog = sqrt(-2*log(H1));
    Norm1 = VLog .* cos(2*pi*H2);
    Norm2 = VLog .* sin(2*pi*H2);
    Norm = [Norm1 ; Norm2];
    %generate asset paths
    Payoff = zeros(NPoints,1);
    NCrossed = 0;
    Path = S0*exp(nuT+siT*Norm);

    for i=1:NPoints

    crossed = any(Path <= Sb);


    if crossed == 0
    Payoff(i) = max(0, X - Path(NPoints));
    else
    Payoff(i) = 0;
    NCrossed = NCrossed + 1;
    end
    end
    [Price,aux,CI] = normfit( exp(-r*T) * Payoff);
    Price
    aux
    CI

    >> ComputeDoPutHalton

    Price =

    6.9588

    aux =
    9.3622e-16

    CI =

    6.9588
    6.9588

    >>

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