Question

In: Finance

For this problem, you are asked to survey the Finance literature and select a published research...

For this problem, you are asked to survey the Finance literature and select a published research paper that provides a practical example on how Monte Carlo is applied for solving a real world problem.

1) List and describe all of the pertinent information so that others can access the article for their own independent reading if so desired.

2) Summarize the definition of the problem, the Monte Carlo methodology employed [including both the relevant mathematical properties and computer resources] and the insights or outcomes associated with use of the Monte Carlo method.

Solutions

Expert Solution

1) Financial literature Review:

  • In the world of finance,mathematical models can be used as approximation to value complex real market derivatives.A recent literature by Broadie & Detemple 2004,focuses on the trends and development of financial options.
  • Since financial markets undergo stochastic fluctuations,numeriacal methods such as Monte Carle(MC) methods become useful tools to price options.

The literature also expanded beyond the basis of these numerical methods, such as Giles(200) his work on improving efficiency by introducing a multilevel approach to MC method.

2) Monte Carlo simulation performs risk analysis bu building model as possible results by substituting range of values .MC involves thousands of racalculations before it is complete.

Monte Carle simulation produces distribution of possible distribution of possible outcomes,probability distribution much more realistic way distributing uncertainity in variable of a risk analysis.


Related Solutions

Select a business problem that you can learn more about by conducting survey research. You will...
Select a business problem that you can learn more about by conducting survey research. You will create an online survey for all of your classmates to take, so design your projects around the assumption that you are finding out what university-aged students think or feel about the topic. Design the survey so that it can be completed in three to five minutes. Do the following: A.   Create the survey with between 5 and 15 survey questions
A market research survey asked the question “Do you enjoy shopping for clothing for yourself?” to...
A market research survey asked the question “Do you enjoy shopping for clothing for yourself?” to 542 male adults and 238 of them said they did. When 543 female adults were asked the same question, 276 of them indicated that they enjoyed shopping for clothing for themselves. (Source: USA Today) Is there a significant difference between the proportion of males and females who enjoy shopping for clothing for themselves at the 0.05 level of significance? Perform a hypothesis test with...
A research group conducted a survey about church attendance. The survey respondents were asked about their...
A research group conducted a survey about church attendance. The survey respondents were asked about their church attendance and asked to indicate their age. The results are as follows: Church Attendance Age 20 to 29 30 to 39 40 to 49 50 to 59 Yes 60 30 68 100 No 87 107 80 50 Answer the following four questions. Use 5% level of significance throughout. 1.We use the sample data above to determine whether church attendance is independent of age....
What are some questions that can be asked for a market research survey for a Winery...
What are some questions that can be asked for a market research survey for a Winery business?
Select one qualitative nursing research article from the literature. In one to two paragraphs answer the...
Select one qualitative nursing research article from the literature. In one to two paragraphs answer the following: What strategies did they use to analyze the data? Did they build in any reliability or validity to their data analysis? What was your reaction to their findings? Do you see any limitations?
You are the manager of Coca-Cola and are facing the effect of a research (published in...
You are the manager of Coca-Cola and are facing the effect of a research (published in 2004) that reports that consuming high fructose corn syrup (HFCS) is associated with promoting obesity. Consider the number of news reports and the number of other research papers on this topic that have been published since 2004. This issue is relevant to you because HFCS is the sweetener used in soft drink manufacturing. Then, you are to: 1.1  Define the own price elasticity of demand....
You are the manager of Coca-Cola and are facing the effect of a research (published in...
You are the manager of Coca-Cola and are facing the effect of a research (published in 2004) that reports that consuming high fructose corn syrup (HFCS) is associated with promoting obesity. Consider the number of news reports and the number of other research papers on this topic that have been published since 2004. This issue is relevant to you because HFCS is the sweetener used in soft drink manufacturing. Then, you are to: 1. What would you do to offset...
You are the manager of Coca-Cola and are facing the effect of a research (published in...
You are the manager of Coca-Cola and are facing the effect of a research (published in 2004) that reports that consuming high fructose corn syrup (HFCS) is associated with promoting obesity. Consider the number of news reports and the number of other research papers on this topic that have been published since 2004. This issue is relevant to you because HFCS is the sweetener used in soft drink manufacturing. Then, you are to: 1. Define the own price elasticity of...
A Pew Research Center survey asked respondents if they would rather live in a place with...
A Pew Research Center survey asked respondents if they would rather live in a place with a slower pace of life or a place with a faster pace of life. The survey also asked the respondent’s gender. Consider the following sample data. Gender Preferred Pace of Life Male Female Slower 232 218 No Preference 19 25 Faster 89 47 a. Is the preferred pace of life independent of gender? Using a  level of significance, what is the -value? Compute the value...
A random survey of 100 students asked each student to select the most preferred form of...
A random survey of 100 students asked each student to select the most preferred form of recreational activity from five choices. Following are the results of the survey: Recreational choice Gender Basketball Baseball/Softball Swimming Jogging/Running Tennis Total Male 21 5 9 12 13 60 Female 9 3 1 15 12 40 Total 30 8 10 27 25 100 Test if the choice of spot and gender are independent (You may use 5% significance level). Calculate the contribution from men who...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT