Illustrates an example of Monte Carlo Simulation
Illustrates an example of Monte Carlo Simulation?
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We hold a complicated portfolio of investments; we would like to know the probability of losing money over the next year as our bonus depends upon our making a profit. We can calculate this probability by simulating how the individual components in our portfolio might develop over the next year. It needs us to have a model for the random behaviour of each of the assets, as well as the relationship or correlation among them, if any. Several problems which are fully deterministic can also be solved numerically by running simulations, too famously getting a value for π.
Describe the long position in an options contract?An option is a contract giving the long the right to buy or sell a given quantity of an asset at a particular price at some time in the future, however not enforcing any obligation on him if the
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