Direct simulation of price particles for option pricing using Monte-Carlo

Abstract

Absence of closed form solutions for many financial models has given rise to numerical and simulation techniques in the recent past. In the current study direct simulation, which is one of the popular approaches in aerospace engineering is used for studying applications in finance, especially option pricing.Monte Carlo (MC) is one of the popular simulation approaches for approximating the value of the quantity under question. However, the slow convergence rate, O(N−1/2) for N number of samples of the MC method has motivated research in Quasi Monte-Carlo (QMC) techniques. QMC methods use low discrepancy (LD) sequences that provide faster, more accurate results than MC methods. In this paper, we focus on the parallelization of the QMC method on a heterogeneous network of workstations (HNOWs) for option pricing. HNOWs are machines with different processing capabilities and have distinct execution time for the same task. It is, therefore, vital to allocate and schedule the tasks depending on the performance a...