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  • %Assetpaths.M %codeto Generate Asset Price Paths: Function Zeros

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    MARTYNS NWAOKOCHA
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    This document provides code to generate asset price paths using Monte Carlo simulation. The code takes in initial price, drift, volatility, time horizon, number of time steps, and number of replications. It generates a matrix of asset prices with replications as rows and time steps as columns. For each replication, it calculates the drift-adjusted change and volatility-adjusted random component at each time step to update the asset price.

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    Financial_Mathematics_Exam_Presentation_on_Monte_Carlo_Methods_in_Down_and_Out_Put_Option_Pricing_Martyns_Nwaokocha_23-23

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    This document provides code to generate asset price paths using Monte Carlo simulation. The code takes in initial price, drift, volatility, time horizon, number of time steps, and number of replications. It generates a matrix of asset prices with replications as rows and time steps as columns. For each replication, it calculates the drift-adjusted change and volatility-adjusted random component at each time step to update the asset price.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    16 views1 page

    %Assetpaths.M %codeto Generate Asset Price Paths: Function Zeros

    Uploaded by

    MARTYNS NWAOKOCHA
    This document provides code to generate asset price paths using Monte Carlo simulation. The code takes in initial price, drift, volatility, time horizon, number of time steps, and number of replications. It generates a matrix of asset prices with replications as rows and time steps as columns. For each replication, it calculates the drift-adjusted change and volatility-adjusted random component at each time step to update the asset price.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Code to generate asset price paths by Monte Carlo simulation

    Code to generate asset price paths by Monte Carlo simulation


    1 % A s s e t P a t h s .m
    2 % code to g e n e r a t e a s s e t p r i c e paths
    3 f u n c t i o n SPaths=AssetPaths ( S0 , mu , sigma , T , NSteps , NRepl )
    4 SPaths = z e r o s ( NRepl , 1 + NSteps ) ;
    5 SPaths ( : , 1 ) = S0 ;
    6 dt = T / NSteps ;
    7 nudt = ( mu −( 0. 5∗ sigma ˆ 2 ) ) ∗ dt ;
    8 sidt = sigma ∗ s q r t ( dt ) ;
    9 f o r i =1: NRepl
    10 f o r j =1: NSteps
    11 SPaths ( i , j+1)=SPaths ( i , j ) ∗ e x p ( nudt + sidt ∗ r a n d n ) ;
    12 end
    13 end
    14

    Next, we generate and plot ten one-year sample paths for an HP Laptop with an initial price
    20,000 CZK, drift 0.1, and volatility 0.7 (on a yearly basis), assuming that the time step is one
    day and I assume that a year consists of 365 trading days.

    Martyns Nwaokocha An application of Monte-Carlo Simulation January 27, 2021 23 / 36

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