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6. Create a spreadsheet modeling trajectories of geometric Brownian motion starting at 50 with growth Rate 5 percent (it is also risk-free rate) and volatility 25 percent. Make a spreadsheet that calculates European calls maturing in 1 year with strikes 50 and 51 on non-dividend paying stock using Monte- Carlo method and using 20,000 trajectories with 250 steps in each trajectory. Compare Monte-Carlo price with 20,000 trajectories to theoretical model price.

6. Create a spreadsheet modeling trajectories of geometric Brownian motion starting at 50 with growth Rate 5 percent (it is also risk-free rate) and volatility 25 percent. Make a spreadsheet that calculates European calls maturing in 1 year with strikes 50 and 51 on non-dividend paying stock using Monte- Carlo method and using 20,000 trajectories with 250 steps in each trajectory. Compare Monte-Carlo price with 20,000 trajectories to theoretical model price.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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6. Create a spreadsheet modeling trajectories of geometric Brownian motion starting at 50 with growth Rate 5 percent (it is also risk-free rate) and volatility 25 percent. Make a spreadsheet that calculates European calls maturing in 1 year with strikes 50 and 51 on non-dividend paying stock using Monte- Carlo method and using 20,000 trajectories with 250 steps in each trajectory. Compare Monte-Carlo price with 20,000 trajectories to theoretical model price.
Transcribed Image Text:6. Create a spreadsheet modeling trajectories of geometric Brownian motion starting at 50 with growth Rate 5 percent (it is also risk-free rate) and volatility 25 percent. Make a spreadsheet that calculates European calls maturing in 1 year with strikes 50 and 51 on non-dividend paying stock using Monte- Carlo method and using 20,000 trajectories with 250 steps in each trajectory. Compare Monte-Carlo price with 20,000 trajectories to theoretical model price.
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