Scribd
Upload
83 views11 pages

HW 6

The document contains Matlab code for several financial modeling exercises: 1) A lattice pricing model to value a bond over different time periods and volatility levels 2) Enhancements to the lattice pricing model to incorporate additional pricing rules 3) A Monte Carlo simulation using antithetic variates to price an European call option 4) An integration method using Monte Carlo to estimate the expected value of exp(X) 5) A Monte Carlo method to estimate the value of pi by randomly generating points in a unit circle.

Uploaded by

api-289065336
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
83 views11 pages

HW 6

The document contains Matlab code for several financial modeling exercises: 1) A lattice pricing model to value a bond over different time periods and volatility levels 2) Enhancements to the lattice pricing model to incorporate additional pricing rules 3) A Monte Carlo simulation using antithetic variates to price an European call option 4) An integration method using Monte Carlo to estimate the expected value of exp(X) 5) A Monte Carlo method to estimate the value of pi by randomly generating points in a unit circle.

Uploaded by

api-289065336
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 11

Matlab exercise

101071041

Bond pricing
function [price, lattice] = LatticePricing(S0,r,T,sigma,N)
deltaT = T/N;
u=exp(sigma * sqrt(deltaT));
d=1/u;
p=(exp(r*deltaT) - d)/(u-d);
lattice = zeros(N+1,N+1);
for j=0:N
lattice(N+1,j+1)=S0*(u^j)*(d^(N-j));
if lattice(N+1,j+1)>=40
lattice(N+1,j+1)=3550;
end
if 40>lattice(N+1,j+1)>=25
lattice(N+1,j+1)=1000+(lattice(N+1,j+1)-25)*170;
end
if lattice(N+1,j+1)<25
lattice(N+1,j+1)=1000;
end
end

for i=N-1:-1:0
for j=0:i
lattice(i+1,j+1) = exp(r*deltaT) * ...
(p * lattice(i+2,j+2) + (1-p) *
lattice(i+2,j+1));
end
end
price = lattice(1,1);
for i=1:1:500
price(i)=LatticePricing(30,0.02,1,0
.2,i);
end
plot (1:1:500, price)
xlabel N
ylabel price

Bond pricing
function [price, lattice] = LatticePricing(S0,r,T,sigma,N)
deltaT = T/N;
u=exp(sigma * sqrt(deltaT));
d=1/u;
p=(exp(r*deltaT) - d)/(u-d);
lattice = zeros(N+1,N+1);
x=zeros(1,N);
for j=0:N
x(j+1)=S0*(u^j)*(d^(N-j));
if x(j+1)>=169
lattice(N+1,j+1)=1000;
end
if 169>x(j+1)>=84.5
lattice(N+1,j+1)=1000-1000*((169/x(j+1))-1);
end
if x(j+1)<84.5
lattice(N+1,j+1)=0;
end
end

for i=N-1:-1:0
for j=0:i
lattice(i+1,j+1) = exp(-r*deltaT)
* ...
(p * lattice(i+2,j+2) + (1-p) *
lattice(i+2,j+1));
end
end
price = lattice(1,1);
for i=1:1:500
price(i)=LatticePricing(100,0.02,1,0.5,i)
;
end
plot (1:1:500, price)
xlabel N
ylabel price

Monte carlo--Antithetic variates


% BlsMCAV.m
function [Price, CI] = BlsMCAV(S0,X,
r,T,sigma,NRepl)
nuT = (r - 0.5*sigma^2)*T;
siT = sigma * sqrt(T);
Veps = randn(NRepl,1);
Payoff1 = max( 0 , X-S0*exp(nuT+si
T*Veps) );
Payoff2 = max( 0 , X-S0*exp(nuT+si
T*(-Veps)) );
DiscPayoff = exp(-r*T) * 0.5 * (Payo
ff1+Payoff2);
[Price,~, CI] = normfit(DiscPayoff);

S0=50;
X=52;
r=0.1;
T=5/12;
sigma=0.4;
NRepl1=100000;
NRepl2=200000;
[c,Bls]=blsprice(S0,X,r,T,sigma)
randn('seed',0);
[MC200000, CI1] =
BlsMC(S0,X,r,T,sigma,NRepl2)
randn('seed',0);
[MCAV100000, CI2] =
BlsMCAV(S0,X,r,T,sigma,NRepl1)

Mc-integration
rand('seed',0);
N=1000;
meanexp=zeros(1,N);
for i=(1:N)
meanexp(i)=2*mean(exp(2*rand(1,i)));
end
exp=exp(2)-1
exp10=meanexp(10)
exp100=meanexp(100)
exp1000=meanexp(1000)
plot(1:N,meanexp);

exp =6.3891
exp10 =5.9957
exp100
=6.3768
exp1000
=6.3803


x=rand(1,1000000);
y=rand(1,1000000);
count=0;
for i=1:1000000
if x(i)*x(i)+y(i)*y(i) <=1
count=count+1;
end
end
pia=4*(count/1000000)

http://upload.wikimedia.org/wikipedia/commons/8/84/Pi_30K.gif

You might also like