13. novembre 2023
Discretization translates continuous financial models into numerically solvable steps, crucial for derivative pricing and risk management. It simplifies complex models, enabling simulations like Monte Carlo for exotic options while introducing some approximation error. #QuantitativeFinance #DerivativesPricing #NumericalMethods
Mathematical Principles and Quantitative Finance · 09. novembre 2023
Richardson extrapolation refines the accuracy of exotic option pricing in financial modeling. It adjusts for errors from numerical methods by using varied step sizes, leveraging the principle that error decreases quadratically with smaller steps, yielding more precise pricing estimates.