Study of Commodity Index and Index Option

Abstract

In this thesis compare value of European Index Options through two models suggested in 'Modeling of Commodity Index and Relative Derivatives' by Yi Ji Hyun. The rst model which is made by assumption that the ratio of value of commodity is rebalanced continuously is used to price options by the suggested formula. The second model which is made by assumption that the ratio of value of commodity is rebalanced discretely and Montecarlo simulation, Variance Reduction, Quasi MonteCarlo are used for valuing European Index Options. At last, we will consider variances of each method and computational time.