rates(用远期利率).pptVIP

* * * * * * * * * * * * * * * * * * * * * * * * * Zheng Zhenlong, Dept of Finance,XMU Time Dependent Parameters in a Binomial Tree (page 409) Making r or q a function of time does not affect the geometry of the tree. The probabilities on the tree become functions of time. We can make s a function of time by making the lengths of the time steps inversely proportional to the variance rate. Zheng Zhenlong, Dept of Finance,XMU Monte Carlo Simulation When used to value European stock options, Monte Carlo simulation involves the following steps: 1. Simulate 1 path for the stock price in a risk neutral world 2. Calculate the payoff from the stock option 3. Repeat steps 1 and 2 many times to get many sample payoff 4. Calculate mean payoff 5. Discount mean payoff at risk free rate to get an estimate of the value of the option Zheng Zhenlong, Dept of Finance,XMU Sampling Stock Price Movements (Equations 19.13 and 19.14, page 419) In a risk neutral world the process for a stock price is We can simulate a path by choosing time steps of length Dt and using the discrete version of this where e is a random sample from f(0,1) Zheng Zhenlong, Dept of Finance,XMU A More Accurate Approach(Equation 19.15, page 420) Zheng Zhenlong, Dept of Finance,XMU Extensions When a derivative depends on several underlying variables we can simulate paths for each of them in a risk-neutral world to calculate the values for the derivative Zheng Zhenlong, Dept of Finance,XMU Sampling from Normal Distribution (Page 422) One simple way to obtain a sample from f(0,1) is to generate 12 random numbers between 0.0 1.0, take the sum, and subtract 6.0 In Excel =NORMSINV(RAND()) gives a random sample from f(0,1) Zheng Zhenlong, Dept of Finance,XMU To Obtain 2 Correlated Normal Samples Obtain independent normal samples x1 and x2 and set A procedure known as Cholesky’s decomposition when samples are required from more than two normal variables (see page 422) Zheng Zhenlong, Dept of