DETERMINING THE VALUE OF DOUBLE BARRIER OPTION USING STANDARD MONTE CARLO, ANTITHETIC VARIATE, AND CONTROL VARIATE METHODS

  • Romaito Br Silalahi Department of Mathematics, Faculty of Mathematics and Natural Science, IPB University, Indonesia
  • Donny Citra Lesmana Department of Mathematics, Faculty of Mathematics and Natural Science, IPB University, Indonesia
  • Retno Budiarti Department of Mathematics, Faculty of Mathematics and Natural Science, IPB University, Indonesia
DOI: https://doi.org/10.30598/barekengvol17iss2pp1017-1026
Keywords: Pricing Barrier Option, Double Barrier, Antithetic Variates, Control Variates, Standard Monte Carlo

Abstract

In this paper, we applied the standard Monte Carlo, antithetic variate, and control variates methods to value the double barrier knock-in option price. The underlying asset used in the calculation of double barrier knock-in option is the share of ANTM from April 1, 2019 until March 1, 2022. The value of the double barrier knock-in option is simulated using standard Monte Carlo, antithetic variate, and control variates methods. The results showed that all the methods converge to the exact solution, with the control variate method to be the fastest. Standard Monte Carlo method has the least computational time, followed by control variate and antithetic variate method. Compared to the other methods, control variate is the most effective and efficient in determining the value of double barrier knock-in option, based on the option value, relative error and computational time. Antithetic variate method converges faster to the exact solution compared to standard Monte Carlo. However it has the longest computation time compared to the other methods.

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Published
2023-06-11
How to Cite
[1]
R. Silalahi, D. Lesmana, and R. Budiarti, “DETERMINING THE VALUE OF DOUBLE BARRIER OPTION USING STANDARD MONTE CARLO, ANTITHETIC VARIATE, AND CONTROL VARIATE METHODS”, BAREKENG: J. Math. & App., vol. 17, no. 2, pp. 1017-1026, Jun. 2023.
Issue
Vol 17 No 2 (2023): BAREKENG: Journal of Mathematics and Its Applications
Section
Articles

Copyright (c) 2023 Romaito Br Silalahi, Donny Citra Lesmana, Retno Budiarti

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