monte-carlo-methods-for-option-pricing

Digital assets are moving into a phase of institutional integration into derivatives markets. Trading venues,... Read more Digital Assets and Derivatives: Where Next?

I know that the risk-neutral price of a call option with strike price $K$ is given by: $$C(K,S_T) = e^{-rT}\int_{0}^{\infty }(S_T-K)^+g(S_T)dS_t$$ Since a payoff is only valid when $ S_T >K $ this turns into: $$C(K,S_T) = e^{-rT}\int_{K}^{\infty }(S_T-K)\times g(S_T)dS_t$$ Now I wanted to differentiate the call formula once and twice with respect to K, so $\frac{\partial C}{\partial K}$ and $…

The intrinsic value of a call option is found by subtracting the discounted strike price from the current share price: $IV = S - X/e^{rT}$ Put-Call parity: $S + p = c + X/e^{rT}$ $c = p + (S - X/e^{rT})$ Since the second term is literally the definition of the intrinsic value of a call, should the time value of the call option $(c-IV)$ be equal to the value of a put with the same strike price??? …

From the Derivatives Practice Group: This week, the CFTC published notices of proposed rulemaking for whistleblower rules and event contracts. The post Derivatives, Legislative and Regulatory Weekly Update (June 12, 2026) appeared first on Gibson Dunn .

CME Group, the world’s leading derivatives marketplace, along with Morningstar, a leading provider of independent investment insights, announced that they have entered into a multi-year licensing agreement for CME Group to launch derivatives products based on key Morningstar equity index benchmarks, including the Morningstar US Total Market, Large Cap, Large Cap Value, Large Cap Growth, Mid Cap, …

CME Group, the world’s leading derivatives marketplace, announced its new Bitcoin Volatility Index futures are now available for trading. First trades were executed as blocks between DV Chain and Monarq Asset Management. “The early support we’ve seen for our new Bitcoin Volatility futures further demonstrates the growing client demand for more innovative tools to more efficiently protect against …

From the Derivatives Practice Group: This week, the CFTC rescinded a policy stating that it will not accept settlement offers … The post Derivatives, Legislative and Regulatory Weekly Update (June 5, 2026) appeared first on Gibson Dunn .

I want to price FX TARFs using the Quantlib library in Python. I want to generate paths using the ql.HestonSLVMCModel vol surface. Then, I want to compare the result to Bloomberg and see if the results are in line. In Bloomberg I can retrieve the SLV parameters clearly: per tenor I can find correlation, vol of vol and mixing fraction. Is it possible in Quantlib to also retrieve it from the SLV m…

I am trying to generate a ql.HestonSLVMCModel vol surface for FX (to generate paths and price TARFs). To start with I need a local vol surface. In FX, strikes are not fixed but quoted in delta. This complicates the use of ql.BlackVarianceSurface because it requires a rectangular grid of vols. In a post by StackG I found a proposed method ( in the comment of user35980 ) whereby the original vols a…

These are quite simple models, so forgive me If my question is basic. I am implementing Monte Carlo simulation for European call option pricing under two setups: Constant volatility (GBM with σ = 0.2) Uncertain volatility where σ is sampled from a lognormal distribution per path. The mean is 0.2 and standard deviation 0.05. In theory, I expected the uncertain volatility case to produce a higher o…

Derivatives have become a critical tool for Australia’s massive superannuation sector, as funds look to... Read more Supporting ISDA SIMM Adoption in Australia

Marex announced that it has been onboarded as a broker on Deribit, one of the leading platforms for digital asset derivatives trading. The onboarding further expands Marex’s institutional digital assets offering and enhances client access to global crypto derivatives markets. Expanding institutional access to crypto derivatives markets Through integration, Marex will provide institutional clients…

CME Group, the world’s leading derivatives marketplace, announced it launched 24/7 trading for Cryptocurrency futures and options. The expanded trading hours, which went live on Friday, May 29, mark a significant milestone in providing global market participants with always-on access to regulated digital asset risk management tools. Over its inaugural weekend, more than 7,200 Cryptocurrency futur…

I'm confused as to why Eurodollar futures prices settle to $100-LIBOR$ at expiration. If at the time of settlement the futures contract was meant to represent a 1,000,000 Eurodollar deposit to mature 3 months in the future, then wouldn't we discount the 1,000,000 back to today to get the settlement price. This would mean the futures contract would settle to $\frac{1,000,000}{1 + LIBOR/4}$ . Where…

From the Derivatives Practice Group: This week, the CFTC issued a policy statement describing the views of the Commission concerning … The post Derivatives, Legislative and Regulatory Weekly Update (May 29, 2026) appeared first on Gibson Dunn .

The Commodity Futures Trading Commission announced it has issued an Order for Approval to KalshiEX, LLC, a designated contract market, for the listing of the BTCPERP Contract, a perpetual contract that references the spot price of bitcoin, as a futures contract. Kalshi submitted the BTCPERP Contract pursuant to Commission Regulation 40.3 for Commission review and approval on May 29, 2026. The Com…

American Innovation Exchange will be the first U.S. derivatives market purpose-built for the AI economy.

Large exchanges are designing derivative products around AI tokens, which are increasingly being considered less a computational output and more a raw material input, like electricity or bandwidth.

Intercontinental Exchange, Inc., one of the world’s leading providers of financial market technology and data powering global capital markets, and home to the largest and most liquid markets to trade energy derivatives, announced record liquidity across its global natural gas and power markets, including record open interest (OI) across North American natural gas, as ICE reached record total OI a…

If we consider the CRR-model in two periods, i.e. T=2. Let $S^1$ be the risky asset with $S_0^1=100$ and $S^0$ the bond with $S_0^0=1$ . Furthermore, we assume the model is arbitrage-free with $y_b=-0.1<r=0.05<y_g=0.2$ . Therefore, an unique equivalent martingale measure $\mathbb{Q}$ exists with $$\mathbb{Q}(\lbrace\omega\rbrace) =0.5^{Z_1(\lbrace\omega\rbrace)+Z_2(\lbrace\omega\rbrace)}\cdot 0.5…