Module 11Pricing & ErrorsLesson 4 of 728 min
MC European Call
Price with discounted mean payoff + standard error.
Estimator
Ĉ = e^{-rT} * mean(max(S_T-K,0))
Stderr
se = e^{-rT} * std(payoffs) / sqrt(N)
CI95
[price - 1.96 se, price + 1.96 se]
Challenge
Price a put with the same paths (reuse S_T).
Tips
- se falls as 1/sqrt(N)
- Compare to BS ~10.45
- Store payoffs for stderr
Try it live
MC European CallRust 2021
Loading editor…
Output
Press Run to compile and execute.