IJSRP, Volume 9, Issue 11, November 2019 Edition [ISSN 2250-3153]
George Korir Kiprop, Kenneth Kiprotich Langat
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.