Author/Authors :
Nouri، Kazem نويسنده Faculty of Mathematics, Statistics and Computer Sciences,Department of Mathematics,Semnan University,Semnan,Iran , , Abbasi، Behzad نويسنده Faculty of Mathematics, Statistics and Computer Sciences,Department of Mathematics,Semnan University,Semnan,Iran , , Omidi، Farahnaz نويسنده Faculty of Mathematics, Statistics and Computer Sciences,Department of Mathematics,Semnan University,Semnan,Iran , , Torkzadeh، Leila نويسنده Faculty of Mathematics, Statistics and Computer Sciences,Department of Mathematics,Semnan University,Semnan,Iran ,
Abstract :
A new Monte Carlo method is presented to compute the prices of digital barrier options on stocks. The main idea of the new approach is to use an exceedance probability and uniformly distributed random numbers in order to efficiently estimate the first hitting time of barriers. It is numerically shown that the answer of this method is closer to the exact value and the first hitting time error of the modified Monte Carlo method decreases much faster than of the standard Monte Carlo methods.
Keywords :
Uniform Distribution , Digital option , Double barrier , Monte Carlo simulation
