List of Questions and Answers

Q1. Monte Carlo vs Binomial Tree - when shall you use one or the other? 

 

Q2. Given that we have seen that trinomial trees do not lead to unique prices, why do banks use them to compute prices? 

 

Q3. Explain the Longstaff-Schwartz algorithm for pricing an early exercisable option with MC? 

 

Q4. In the pricing of options, why doesn't it matter if the stock price exhibits mean reversion? 

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