Monte Carlo and numerical pricing
Monte Carlo, variance reduction, finite differences, Fourier pricing with characteristic functions, American options by regression and simulated Greeks.
8 planned
Step 22 is part of the option pricing path, a 22-step course from discounting to Black–Scholes.
No page in this subject is open yet. The planned list below shows what is coming, in learning order.
Planned
In learning order. These are not pages yet.
- How a characteristic function prices an optionGraduate
- Monte Carlo option pricingAdvanced undergrad
- How variance reduction improves a Monte Carlo priceAdvanced undergrad
- How a finite-difference grid prices an optionAdvanced undergrad
- How Longstaff-Schwartz estimates an exercise ruleGraduate
- Why Euler and Milstein give different path errorsGraduate
- How to estimate Greeks from simulated pathsGraduate
- How a Brownian bridge detects missed barrier crossingsGraduate
How it connects
Builds on Numerical methods Stochastic calculus and SDEs Arbitrage and risk-neutral pricing PDE methods Derivatives Statistical inference Regression Probability Stochastic processes
Leads to Volatility and jump models Hedging and calibration Credit risk
Subjects marked “connection” are linked by a related idea, not by a prerequisite.