Abstract: A Monte Carlo system and method are presented for the pricing of financial instruments such as derivative securities and for assisting a user in making an investment decision using the output of the system and method. A path-integral approach is described that relies upon the probability distribution of the complete histories of an underlying security. A Metropolis algorithm is used to generate samples of a probability distribution of the paths (histories) of the security. Complete information on the derivative security is obtained in a single simulation, including parameter sensitivities. Multiple values of parameters are also obtained in a single simulation. The method is applied in a plurality of systems, including a parallel computing environment and an online real-time valuation service. The method and system also have the capability of evaluation American options using Monte Carlo methods.

Abstract: A Monte Carlo system and method are presented for the pricing of financial instruments such as derivative securities. A path-integral approach is described that relies upon the probability distribution of the complete histories of an underlying security. A Metropolis algorithm is used to generate samples of a probability distribution of the paths (histories) of the security. Complete information on the derivative security is obtained in a single simulation, including parameter sensitivities. Multiple values of parameters are also obtained in a single simulation. The method is applied in a plurality of systems, including a parallel computing environment and an online real-time valuation service. The method and system also have the capability of evaluating American options using Monte Carlo methods.