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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?
How does the Monte Carlo simulation work exactly?
The Monte Carlo simulation involves generating a large number of random price paths for the underlying asset and calculating the option's value for each path. By taking the average of these calculated values, we get an estimate for the option's price. This approach allows for greater flexibility and accuracy in pricing options.