The Monte Carlo Simulation in Excel
In the previous video, Abdulla explained how Monte Carlo is a way of modelling a probability distribution of returns or prices. In this video, Abdulla examines the nature of stock returns to come up with a formula that can be used in Excel to simulate the price paths.
Overview
Monte Carlo is a way of modelling a probability distribution of returns or prices. In this particular case, changes in stock prices. This can be calculated by multiplying the spot price today by e to the power of a continuously compounded rate of return (r).
Key learning objectives:
How do we calculate changes in stock prices?
The rate (r) is made up of which two components?
Which formula can we input in excel for our simulations?
Summary
Expert
Abdulla Javeri
Abdulla’s career in the financial markets started in 1990 when he entered the trading floor of the London International Financial Futures Exchange, LIFFE, and qualified as a pit trader in equity and equity index options. In 1996, Abdulla became a trainer for regulatory qualifications and then for non-exam courses, primarily covering all major financial products.
05:39
05:38
03:58
04:56
04:34
04:40
05:42
04:41
04:16
07:58
05:14
Related videos
Introduction to Options, Pricing and Use Cases
Peter Eisenhardt • 13:18