Pricing Writer-Extendable Call Options with Monte Carlo Simulation

Authors

  • Hazimah Wan Omar Department of Mathematics and Statistics, Faculty of Science, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia
  • Siti Nur Iqmal Ibrahim Department of Mathematics and Statistics, Faculty of Science, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia

DOI:

https://doi.org/10.58915/amci.v13iNo.1.491

Abstract

Writer-extendable option is an exotic option that can either be exercised at its initial maturity time, or be extended to a future maturity time. Within the Black-Scholes environment, this study aims to price writer-extendable call options using the Monte Carlo simulation technique, and compare the obtained prices with the closed-form pricing formula. Numerical examples are provided using the closed-form solutions and the Monte Carlo simulation via Euler scheme, which shows that the prices obtained via the latter are accurate.

Keywords:

Black-Scholes, Monte Carlo simulation, writer-extendable

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Published

2024-02-14

How to Cite

Hazimah Wan Omar, & Siti Nur Iqmal Ibrahim. (2024). Pricing Writer-Extendable Call Options with Monte Carlo Simulation. Applied Mathematics and Computational Intelligence (AMCI), 13(No.1), 128–135. https://doi.org/10.58915/amci.v13iNo.1.491

Issue

Vol. 13 No. No.1 (2024): February 2024

Section

Articles