Talk:Monte Carlo option model

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[edit] Reference to cosmic radiation

I don't see the need for the reference to cosmic radiation, it seems kind of random. Finnancier 04:24, 15 September 2007 (UTC)

[edit] Reference to LURCH

I don't see the need for the reference and link to LURCH, it is an unrelated (or almost unrelated) technique in a different field. Encyclops 14:55, 15 September 2007 (UTC)

[edit] Constant Drift?

As we know, the price movements of underlying option's assets, show all but constant drift. Can the MC option model be tweaked to take into account random steps of random size? Harol2 (talk) 12:06, 18 May 2008 (UTC)

Yes, that would be described as a Stochastic Volatility MC model. A casual Google search ("Heston Monte Carlo") even uncovers source code for such a model within the first few hits: [1] . The basic idea is that two random processes have to be simulated: the first one represents the current volatility of the market, and the second random process is the asset price itself. (By the way what you call drift is more commonly called diffusion or volatility. The word drift is usually reserved for the long term movement in one direction). Encyclops (talk) 14:35, 18 May 2008 (UTC)