Where are Monte Carlo simulations used
Where are Monte Carlo simulations used?
Expert
Monte Carlo simulations are used within financial problems for solving two kinds of problems:
• Exploring the statistical properties of a portfolio of investments or cashflows to determine quantities like expected returns, risk, possible downsides, probabilities of making certain profits or losses, etc.
• Finding the value of derivatives by exploiting the theoretical relationship among option values and expected payoff in a risk-neutral random walk.
Why is traditional, simple VaR measurement not coherent?
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Suppose today's settlement price on a CME DM futures contract is $0.6080/DM. You have a short position in one contract. Your margin account presently has a balance of $1,700. The next three days' settlement prices are $0.6066, $0.6073, & $0.5989. Compu
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