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Table 1: Option price data for Problem 5.3. Index 13 St Index 91.83 | 11 62.61 49.00 22.33 21.53 80.39 42.13 31.75 56.74 47.25 SI
Table 1: Option price data for Problem 5.3. Index 13 St Index 91.83 | 11 62.61 49.00 22.33 21.53 80.39 42.13 31.75 56.74 47.25 SI 48.60 48.87 84.11 34.07 52.72 57.03 72.52 37.54 47.22 46.97 19 Problem 5.3 Using a Monte Carlo generator one finds the 20 realizations of the stock price at maturity ST shown in Table 1. Using these realizations compute the payoff of an European call option with strike price K = $50. The interest rates are zero (no discounting). (a) What is the estimated option price, and the 95% confidence level for the price? (b) How many Monte Carlo samples are required the reduce the error by a factor of 10? Note: Very popular interview question (especially (b)). Table 1: Option price data for Problem 5.3. Index 13 St Index 91.83 | 11 62.61 49.00 22.33 21.53 80.39 42.13 31.75 56.74 47.25 SI 48.60 48.87 84.11 34.07 52.72 57.03 72.52 37.54 47.22 46.97 19 Problem 5.3 Using a Monte Carlo generator one finds the 20 realizations of the stock price at maturity ST shown in Table 1. Using these realizations compute the payoff of an European call option with strike price K = $50. The interest rates are zero (no discounting). (a) What is the estimated option price, and the 95% confidence level for the price? (b) How many Monte Carlo samples are required the reduce the error by a factor of 10? Note: Very popular interview question (especially (b))
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