The main aim of this research is to explore and compare diverse methodologies for valuing options. Our analysis primarily focuses on the Black-Scholes model, a commonly employed analytical approach for pricing European options. This model assumes that the underlying asset adheres to a geometric Brownian motion and offers a closed-form solution for option pricing. We delve into the mathematical foundations and underlying assumptions of the Black-Scholes model while also examining its inherent limitations.
Lecturați gratuit NUMERICAL METHODS FOR THE BLACK – SCHOLES MODEL, autor Tîrșu Cătălina
Lucrarea poate fi citită online doar în Librăria Scriitorilor (www.librariascriitorilor.ro). ISBN 978-606-30-6485-2
Additionally, we investigate the Monte Carlo method as an alternative approach to option valuation. Monte Carlo simulations involve generating random scenarios to estimate the value of the option based on the average outcome across numerous iterations. This method proves particularly valuable when dealing with complex options, such as Asian options.