In mathematical finance, a Monte Carlo option model uses Monte Carlo methods[Notes 1] to calculate the value of an option with multiple sources of uncertainty or with complicated features.
In 1996, M. Broadie and P. Glasserman showed how to price Asian options by Monte Carlo.
An important development was the introduction in 1996 by Carriere of Monte Carlo methods for options with early exercise features.
[12] It is based on the iteration of a two step procedure: As can be seen, Monte Carlo Methods are particularly useful in the valuation of options with multiple sources of uncertainty or with complicated features, which would make them difficult to value through a straightforward Black–Scholes-style or lattice based computation.
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