ABSTRACT. This article presents a practical case in which two of the most efficient numerical procedures developed for derivative analysis are applied to evaluate the POP (Investment Protection with Participation), a structured operation created by São Paulo Stock Exchange -BM&FBOVESPA. The first procedure solves the differential equation through the use of implicit finite differences method. Due to its characteristics, the approach makes it possible to run sensitivity analysis as well as price estimation. In the second, the problem is solved by Monte Carlo simulation, which facilitates the identification of the probability related to the exercise of the embedded options.
This article presents an approach and a model to valuing discrete
barrier American options. The developed model consists of an adaptation of
the method of Grant, Vora and Weeks (1997), in order to allow to incorporate
the barriers. The Hybrid Quasi-Monte Carlo method was used in the
simulations and the Bisection method in the definition of the options
trigger curves. The results found in the application of the developed model
were compared with the estimated by the Adaptive Mesh Model, developed by
Ahn et al (1999). In addition, the sensitivity of the options price relative
to changes in inputs parameters was analyzed, confirming the consistence of
the model.
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