The conversation between human and AI assistant.
Why is the Monte Carlo simulation used for the option pricing if the goal is to get close to the price generated by the Black-Scholes model?
Can you explain to me why the Monte Carlo simulation is used for option pricing instead of just relying on the Black-Scholes model?
Certainly. The Monte Carlo simulation is used because it can account for more complex scenarios that the Black-Scholes model cannot. It takes into account a wider range of possible outcomes and their probabilities, resulting in a more accurate estimate of the option price.