Abstract:
This paper aims at introducing the concept of pricing options by applying numerical methods. In particular we focus on the pricing of a European Put Option by two numerical techniques, that is, the Monte-Carlo simulation and the Crank-Nicolson finite difference method. In the Monte-Carlo simulation method, the concept of a random walk is used in the simulation of the path followed by the underlying stock price.
Reference this Research Paper (copy & paste below code):
George Korir Kiprop, Kenneth Kiprotich Langat
(2019); Pricing a European Put Option by Numerical Methods; International Journal of Scientific and Research Publications (IJSRP)
9(11) (ISSN: 2250-3153), DOI: http://dx.doi.org/10.29322/IJSRP.9.11.2019.p9575