Pricing of Asian Options and Barrier Options for The Microsoft Corporation Based on Monte-Carlo Simulation

Abstract

In the current unstable financial market, option is a popular financial tool to hedge the risk of the underlying asset. Compared with the vanilla options, the exotic options can deal with the more complex requirements of investors. This paper focus on evaluating the Asian options and barrier options based on the data simulated from the Microsoft Corporation. This paper has three main research findings: the first is that it prices the Asian options and four types of the barrier options; the second is that it illustrates the reason for the price difference among the European options, the Asian options and barrier options with the help of payoff diagrams; the third is that it is explain the relationship between these two exotic options and the parameters used in the simulation. This paper would help investors better understanding the difference between the Asian options and barrier options from the perspective of the price and the sensitivity to the parameters.