# ACCURATE VALUATION OF FINANCIAL OPTIONS BY EFFICIENT SIMULATION OF PROBABILITY DISTRIBUTIONS

### Abstract

In this paper we analyze possible implementations and applications of

Ornstein-Uhlenbeck (O-U) process and probability distributions for valuation of option

contracts. Based on specific features and types of options we specify the advantages and

disadvantages of O-U based simulation for using it as a universal method to asses

different financial options. Implementation of a simulation code that uses pseudo random

number generation is suggested and tested to confirm its accuracy and effectiveness in

providing results that comply with and are very close to theoretically computer values for

an Ornstein-Uhlenbeck process.

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