Abstract
The purpose of the study is to reduce the error in the pricing process of financial derivatives, as well as to obtain more accurate product values, thereby reducing transaction costs, accelerating transaction speed, establishing a larger investment scale, and enabling investors to obtain excellent returns under market conditions as much as possible. Based on the variance reduction technology, a Monte Carlo model that can effectively analyze financial prices is added to analyze price fluctuations and find the optimal holding time for users of financial derivatives, thereby reducing the risk of holding the financial derivatives. The results show that the Monte Carlo model-based variance reduction technology can significantly improve the simulation efficiency of financial derivatives pricing. In addition, the importance sampling method is used to optimize the selection, thereby making it closer to the theoretical values. The proposed method is easy to implement and has higher computational efficiency, which can ensure the financial benefits of users holding financial derivatives during the holding period. It can be seen that the Monte Carlo model-based variance reduction technology has high application value in the pricing of financial derivatives, and it is of great significance for the pricing of other products.
Highlights
With the continuous development of the world economy, financial derivatives become increasingly various
The global financial crisis triggered by the US subprime mortgage crisis in 2008 caused a huge blow to the major economic entities worldwide, making the world economy be into a recession
The results showed that the Monte Carlo simulation method of conditional expectation and importance sampling and the two-variance reduction technology could be used to analyze the price of discrete obstacles, which could obtain more stable price data [12]
Summary
With the continuous development of the world economy, financial derivatives become increasingly various. The financial derivatives are derived from basic financial instruments, such as currency, interest rate stocks, and commodities. Financial derivatives cannot exist independently, and their values largely depend on basic financial instruments. The global financial crisis triggered by the US subprime mortgage crisis in 2008 caused a huge blow to the major economic entities worldwide, making the world economy be into a recession. The financial markets of many developed countries suffered heavy losses during the financial crisis. The most serious losses were the outbreak of the financial crisis and the United States, the most developed financial derivatives market. The most important factors causing the crisis is considered to be the globalization of financial derivatives and the global proliferation of financial derivatives caused by lack of regulation.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
