Price is what you pay. Value is what you get.
— Warren Buffet
By now, the whole approach for building the
DX derivatives analytics library—and its associated benefits—should be rather clear. By strictly relying on Monte Carlo simulation as the only numerical method, we accomplish an almost complete modularization of the analytics library:
Relevant risk factors (underlyings) are modeled as instances of one of three simulation classes:
Options and derivatives to be valued are modeled as instances of one of two valuation classes:
One last step is missing: the valuation of possibly complex portfolios of options and derivatives. To this end, we require the following:
However, although we have in principle allowed (and even required) providing a currency for both simulation ...