This program enables you to price an option basket, i.e. an option on an index. It uses a classic Monte Carlo estimator and the antithetic method.
Note that you have to have C++11 installed on your computer. If you're working on Linux it is possible that you have
to specify the option -std=c++11 in the Makefile.
To run the program you also need the linear algebra library Armadillo that you can download here.
To use the program, download this repository, in a terminal cd to the right folder, for GNU/Linux and Mac type make.
Then to exectute with the preloaded datas:
./main <precision>
For a first test I suggest to use the precision 1e-1.
I preloaded some data, e.g. the correlation matrix, the spot prices, etc. which are in the data folder. These data are stored in
.txt files.
By default the basket dimension is 10, you can change this in the constructors, but of cours you will also have to change the
matrix and vectors dimensions. For further details see the complete documentation on my website in the section
Other Probability and Statistics work.
The Monte Carlo object has two methods for estimating the price
- a classic Monte Carlo estimator using the Law of Large Numbers
- the antithetic method, by considering the opposite Brownian motion
For details on the code, all the information you need is in the complete documentation on my website
in the section
Other Probability and Statistics work.
If you want more details on the maths behind these estimation methods, you can read the lecture note for Numerical Probability for Finance also on my website.
The price outputs are in a very simple format
Strike | 80 90 100 110 120
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Est. | 31.2 22.7 15.5 10.1 6.2
Precision: 0.1
Nb simulations: 250731
Computation time: 4.7775
For issues don't hesitate to email me.