Keegan, Sinead (2008) *Vibrato Monte Carlo and the calculation of greeks.* Masters thesis, University of Oxford.

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## Abstract

In computational ¯nance Monte Carlo simulation can be used to calculate

the correct prices of ¯nancial options, and to compute the values of the as-

sociated Greeks (the derivatives of the option price with respect to certain

input parameters). The main methods used for the calculation of Greeks

are finite difference, likelihood ratio, and pathwise sensitivity. Each of these

has its limitations and in particular the pathwise sensitivity approach may

not be used for an option whose payoff function is discontinuous. Vibrato

Monte Carlo is a new idea that addresses the limitations of previous methods;

it combines the pathwise sensitivity approach for the SDE path calculation

with the likelihood ratio method for payoff evaluation. This thesis discusses

Vibrato Monte Carlo approximations for a digital option on an asset follow-

ing one-dimensional geometric Brownian motion.

Item Type: | Thesis (Masters) |
---|---|

Subjects: | H - N > Mathematics education |

Research Groups: | Mathematical and Computational Finance Group |

ID Code: | 712 |

Deposited By: | Laura Auger |

Deposited On: | 02 Jul 2008 |

Last Modified: | 20 Jul 2009 14:23 |

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- Vibrato Monte Carlo and the calculation of greeks. (deposited 02 Jul 2008)
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