Module 11Pricing & ErrorsLesson 5 of 718 min
Compare MC to Black-Scholes
Cross-check methods; discuss bias vs variance.
Good practice
Always have a closed-form check when available.
Bias
Euler discretization can bias path-dependent prices; exact terminal is unbiased for vanilla under GBM.
Variance
Reduced by more paths or variance reduction.
Challenge
Run MC at N=5k,20k,50k and watch se shrink.
Tips
- Closed form is ground truth
- MC for exotics
- Report CI always
Try it live
Compare MC to Black-ScholesRust 2021
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Output
Press Run to compile and execute.