I
get easily carried away by all things European; the architecture, the art, the
culture, the accents, the visage (of women strictly). No surprise that out of
assortments of quantification and approximation techniques, the Monte Carlo method
catches my attention more. It's soooo Italian.
Monte
Carlo in general is the name of the administrative area under the Principality
of Monaco. Of course I know that because of Wikipedia and because I saw Selena
Gomez strutting around it in a sunshine dress and certainly because Monaco
rings of one of the finest racing circuits and records some of the most
celebrated Formula 1 races ever.
However,
the Monte Carlo Simulation seemed like too much unnecessary work for estimating Option prices. Most of you would remember it from your
Financial Economics Exam (MFE) of SOA and I suppose its applications in Finance
are just as many as the only two pages dedicated for it in the ASM Manual.
