Application of Monte Carlo model in financial field

Abstract

MC (Monte Carlo) model is also called statistical test method or statistical simulation method. According to the statistical sampling theory, it is a method of approximate solution through probability simulation and statistical test of random variable function. Compared with the traditional mathematical statistics method, MC method alleviates the difficulty of realization with the help of computer, and is easy to operate and understand. Other mathematical methods can find an appropriate way to deal with complex problems that are difficult or even impossible to deal with. This paper studies the application of MC model in the financial field: the application in the pricing of financial options and the application in the guaranteed price of multi-period income. Using MC simulation model, we can not only analyze the risk of investment projects, but also play a great role in management, financial analysis and marketing.