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1. 1. Numerical solution for derivative models using finite difference methods and how this can be used with Monte Carlo simulation

   University essay from Lunds universitet/Matematisk statistik

   Author : Marcus Hallabro; [2019]
   Keywords : Finite Difference Method; Option Pricing; Feynman-Kac Rep- resentation; Monte Carlo Simulation; Negative Probabilities.; Mathematics and Statistics;

   Abstract : Derivative models often come in the form of stochastic differential equations. From these equations a partial differential equation (PDE) can be derived. By discretizing the PDE the numerical solution is obtained on a form where the value of the derivative can be seen as a probabilistic weighting of future values. READ MORE