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    This document contains Matlab code for pricing Asian and lookback options using Monte Carlo simulation. It generates stock price paths using different random number generation techniques, including Halton sequences, normal random numbers, and the Box-Muller method. It then calculates option payoffs along each path and takes the average to estimate the option price. Confidence intervals are also estimated using increasing numbers of sample paths to examine the convergence of the price estimates.

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    This document contains Matlab code for pricing Asian and lookback options using Monte Carlo simulation. It generates stock price paths using different random number generation techniques, including Halton sequences, normal random numbers, and the Box-Muller method. It then calculates option payoffs along each path and takes the average to estimate the option price. Confidence intervals are also estimated using increasing numbers of sample paths to examine the convergence of the price estimates.

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    30 views13 pages

    HW 10

    Uploaded by

    api-289065336
    This document contains Matlab code for pricing Asian and lookback options using Monte Carlo simulation. It generates stock price paths using different random number generation techniques, including Halton sequences, normal random numbers, and the Box-Muller method. It then calculates option payoffs along each path and takes the average to estimate the option price. Confidence intervals are also estimated using increasing numbers of sample paths to examine the convergence of the price estimates.

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    of 13

    Matlab exercise

    101071041

    #HW1 Halton confidence interv


    al
    function [P,ci] = AsianHalton(S0,X,r,T,sigma,
    NSamples,NRepl)
    Payoff = zeros(NRepl,1);
    Path=HaltonPaths(S0,r,sigma,T,NSamples,N
    Repl);
    Payoff = max(0, mean(Path(:,2:(NSamples+
    1)),2) - X);
    [P,~,ci] = normfit( exp(-r*T) * Payoff);

    COM.m
    S0=50;X=50;
    r=0.1;T=5/12;
    sigma=0.4;NSamples=5;
    NRepl1=1000;NRepl2=2000;
    NRepl3=3000;NRepl4=10000;
    NRepl5=30000;
    [AsianHalton1000,ci_1000]=AsianHalton(S0,X,r,T,sigma,NSamples,NR
    epl1)
    [AsianHalton2000,ci_2000]=AsianHalton(S0,X,r,T,sigma,NSamples,NR
    epl2)
    [AsianHalton3000,ci_3000]=AsianHalton(S0,X,r,T,sigma,NSamples,NR
    epl3)
    [AsianHalton10000,ci_10000]=AsianHalton(S0,X,r,T,sigma,NSamples,
    NRepl4)

    AsianHalton1000 =
    4.0289
    ci_1000 =
    3.6465
    4.4113
    AsianHalton2000 =
    3.9979
    ci_2000 =
    3.7294
    4.2664
    AsianHalton3000 =
    3.9619

    ci_3000 =
    3.7460
    4.1778
    AsianHalton10000 =
    3.9441
    ci_10000 =
    3.8270
    4.0613
    AsianHalton30000 =
    3.9742
    ci30000 =
    3.9073
    4.0412

    #HW2 Asian option

    max(s(T)-A,0)

    function [P,ci] = Asianrandn(S0,r,T,sigma,NSamples,NRepl)


    %% randn path
    dt = T/NSamples;
    nudt = (r-0.5*sigma^2)*dt;
    sidt = sigma*sqrt(dt);
    Increments = nudt + sidt*randn(NRepl, NSamples);
    LogPaths = cumsum([log(S0)*ones(NRepl,1) , Increments] , 2);
    Path = exp(LogPaths);
    %% mc Asian max(s(T)-A,0)
    Payoff = zeros(NRepl,1);
    ST=Path(:,NSamples+1);
    Payoff = max(0, ST-mean(Path(:,2:(NSamples+1)),2) );
    [P,~,ci] = normfit( exp(-r*T) * Payoff);

    Compare.m
    S0=50;X=50;
    r=0.1;T=5/12;
    sigma=0.4;NSamples=5;
    NRepl1=1000;NRepl2=2000;
    NRepl3=3000;NRepl4=10000;
    NRepl5=30000;
    [Asian1000,ci_1000]=Asianrandn(S0,r,T,sigma,NSamples,NRepl1)
    [Asian2000,ci_2000]=Asianrandn(S0,r,T,sigma,NSamples,NRepl2)
    [Asian3000,ci_3000]=Asianrandn(S0,r,T,sigma,NSamples,NRepl3)
    [Asian10000,ci_10000]=Asianrandn(S0,r,T,sigma,NSamples,NRepl4)
    [Asian30000,ci30000]=Asianrandn(S0,r,T,sigma,NSamples,NRepl5)

    Asian1000 =
    2.8199

    ci_1000 =
    2.5550
    3.0848

    ci_3000 =
    2.6858
    3.0161
    Asian10000 =
    2.9471

    Asian2000 =
    2.9723

    ci_2000 =
    2.7660
    3.1786

    Asian3000 =
    2.8510

    ci_10000 =
    2.8558
    3.0384
    Asian30000 =
    2.9487
    ci30000 =
    2.8962
    3.0012

    #HW3.1 LOOKBACK OPTION


    x-S(T)

    function [P,ci] = lookback_rand_inversecdf(S0,r,T,sigma,NSamples,NRepl)


    %% rand+inverse cdf path
    dt = T/NSamples;
    nudt = (r-0.5*sigma^2)*dt;
    sidt = sigma*sqrt(dt);
    zz=rand(NRepl, NSamples);
    mu = 0;sigma = 1;
    pd = makedist('Normal',mu,sigma);
    c=icdf(pd,zz);
    Increments = nudt + sidt*c;
    LogPaths = cumsum([log(S0)*ones(NRepl,1) , Increments] , 2);
    Path = exp(LogPaths);
    %%LOOKBACK OPTION
    Payoff = zeros(NRepl,1);
    ST=Path(:,NSamples+1);
    for i=1:NRepl
    smax(i)=max(Path(i,:));
    end
    Payoff = max(0, (smax)'-ST );
    [P,~,ci] = normfit( exp(-r*T) * Payoff);

    Sma

    S0=50;X=50;
    r=0.1;T=5/12;
    sigma=0.4;NSamples=5;
    NRepl1=1000;NRepl2=2000;
    NRepl3=3000;NRepl4=10000;
    NRepl5=30000;
    [lookback1000,ci_1000]=lookback_rand_inversecdf(S0,r,T,sigma,NSamples,NRe
    pl1)
    [lookback2000,ci_2000]=lookback_rand_inversecdf(S0,r,T,sigma,NSamples,NRe
    pl2)
    [lookback3000,ci_3000]=lookback_rand_inversecdf(S0,r,T,sigma,NSamples,NRe
    pl3)
    [lookback10000,ci_10000]=lookback_rand_inversecdf(S0,r,T,sigma,NSamples,N
    Repl4)
    [lookback30000,ci30000]=lookback_rand_inversecdf(S0,r,T,sigma,NSamples,NR
    epl5)

    lookback1000 =
    6.6249
    ci_1000 =
    6.2315
    7.0183

    lookback10000 =
    6.5920

    lookback2000 =
    6.5548
    ci_2000 =
    6.2802
    6.8294

    ci_10000 =
    6.4687
    6.7153

    lookback3000 =
    6.7119
    ci_3000 =
    6.4850
    6.9389

    lookback30000 =
    6.5944
    ci30000 =
    6.5231
    6.6656

    #HW3.2 LOOKBACK OPTION


    min

    function [P,ci] = lookback_rand_boxmuller(S0,r,T,sigma,NSamples,NRepl)


    %% rand+boxmuller path
    dt = T/NSamples;
    nudt = (r-0.5*sigma^2)*dt;
    sidt = sigma*sqrt(dt);
    NRepl = 2*ceil(NRepl/2);
    z1=rand(NRepl/2, NSamples);z2=rand(NRepl/2, NSamples);
    VLog = sqrt(-2*log(z1));
    Norm1 = VLog .* cos(2*pi*z2);Norm2 = VLog .* sin(2*pi*z2);
    RandMat = [Norm1 ; Norm2];
    Increments = nudt + sidt*RandMat;
    LogPaths = cumsum([log(S0)*ones(NRepl,1) , Increments] , 2);
    Path = exp(LogPaths);
    %LOOKBACRK MC
    Payoff = zeros(NRepl,1);
    ST=Path(:,NSamples+1);
    for i=1:NRepl
    smin(i)=min(Path(i,:));
    end
    Payoff = max(0, ST-(smin)' );
    [P,~,ci] = normfit( exp(-r*T) * Payoff);

    S(T)-s

    S0=50;X=50;
    r=0.1;T=5/12;
    sigma=0.4;NSamples=5;
    NRepl1=1000;NRepl2=2000;
    NRepl3=3000;NRepl4=10000;
    NRepl5=30000;
    [lookback1000,ci_1000]=lookback_rand_boxmuller(S0,r,T,sigma,NSamples,NRepl1)
    [lookback2000,ci_2000]=lookback_rand_boxmuller(S0,r,T,sigma,NSamples,NRepl2)
    [lookback3000,ci_3000]=lookback_rand_boxmuller(S0,r,T,sigma,NSamples,NRepl3)
    [lookback10000,ci_10000]=lookback_rand_boxmuller(S0,r,T,sigma,NSamples,NRepl
    4)
    [lookback30000,ci30000]=lookback_rand_boxmuller(S0,r,T,sigma,NSamples,NRepl
    5)

    lookback1000 =
    8.3792
    ci_1000 =
    7.7955
    8.9628
    lookback2000 =
    8.3801
    ci_2000 =
    7.9540
    8.8061
    lookback3000 =
    7.7277

    ci_3000 =
    7.4089
    8.0464

    lookback10000 =
    8.1042
    ci_10000 =
    7.9235
    8.2850
    lookback30000 =
    8.0133
    ci30000 =
    7.9072
    8.1194

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