COMP10001 Lecture 10: COMP10001 Lecture 10 + 11

Baase states that it is not just technology that changes so quickly, but also the impacts which they have upon society. Do you agree? How does that align with the assertion in the lecture that we are now living in a third great technological transformation called the Knowledge Revolution? Have computers truly changed our lives so much that we can call this a revolution like the Industrial Revolution of the 18th century?

How to price a basket option where we can sell stock 1 at S1 or Stock 2 at S2 but not both at expiry? The time to expire is 2 months. The risk free rate, volatilities and drifts have been given so is the stock co-relation. Which method would be the best to solve?

Binomial pricing or Monte carlo method?

Binomial method seems a bit tedious.

I am not sure how to implement this in monte carlo method using programming.

I know that monte carlo uses random numbers to find the average of all the outputs.

I would appreciate if anyone could at least guide me through the process and tell me at least which formula to use? Or at least something like an algorithm to solve this problem.

I know that the value of the option would be something like the maximum value of both the stocks but I am not completely clear how to proceed.

Do you agree with the assertion that we are now living in a third-great technological transformation-the Knowledge Revolution? Have computers truly changed our lives so much that we can call this a revolution like the Industrial Revolution of the 18th century? Support your answer providing specific comparisons from the two periods.

You wont be awarded points unless the answeres are specific to the question. Needs to have a thesis statement and be at least 5 paragraphs long