PRICING EXOTIC OPTIONS

Authors:
Sheldon M. Ross;J. George Shanthikumar
Affiliations:
Department of Industrial Engineering and Operations Research, University of California, Berkeley, California 94720;Department of Industrial Engineering and Operations Research, University of California, Berkeley, California 94720
Venue:
Probability in the Engineering and Informational Sciences
Year:
2000

Citing 1
Cited 2

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Probability in the Engineering and Informational Sciences

A new efficient simulation strategy for pricing path-dependent options

Proceedings of the 38th conference on Winter simulation
On pricing discrete barrier options using conditional expectation and importance sampling Monte Carlo

Mathematical and Computer Modelling: An International Journal

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Abstract

We show that if the payoff of a European option is a convex function of the prices of the security at a fixed set of times, then the geometric Brownian motion risk neutral option price is increasing in the volatility of the security. We also give efficient simulation procedures for determining the no-arbitrage prices of European barrier, Asian, and lookback options.