# Monte Carlo Valuation of an Option

Monte Carlo Valuation of an Option

Perspective: The call option price is shown as a function of the strike price. The black line comes from the Black-Scholes theory while the red bar (95% confidence band) is a Monte Carlo estimate. The controls are the number of Monte Carlo price paths and the tenor of the option in weeks.

Detail: The distributions of the stock price and the final option payoff are shown. Note that a relatively high percentage of price paths leads to an "out of the money" finish for the option.