Not a big fun of option though I do love Monte Carlo method. A bank has written a call option on one stock and a put option on another stock. Fo

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Financial engineering problem...

Not a big fun of option though I do love Monte Carlo method. A bank has written a call option on one stock and a put option on another stock. For the first option the stock price is 50, the strike price is 51, the volatility is 28% per annum, and the time to maturity is 9 months. For the second option the stock price is 20, the strike price is 19, and the volatility is 25% per annum, and the time to maturity is 1 year. Neither stock pays a dividend. The risk-free rate is 6% per annum, and the correlation between stock price returns is 0.4.

1. Using C/C++ or Java or Matlab to calculate the 10-day 99% Monte Carlo Simulation based VaR for the portfolio. Set the number of simulation to 5000.

2. What else data is required to calculate the 10-day 99% Historical based VaR for the portfolio?

    • 11 days ago
    Using C/C++ or Java or Matlab to calculate the 10-day 99% Monte Carlo Simulation based VaR for the portfolio. Set the number of simulation to 5000
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