Hi !I think that Monte-Carlo methods are used in derivatives pricing and for risk management purpose (like generalized scenario). In which financial fields can we also find Monte-Carlo methods ?What would be a research's field related to Monte-Carlo ?Thanks for your answers!

Monte Carlo methods are used in almost all computationally intensive fields. You have identified the main two in finance: pricing and risk management.Are you interested in research improving Monte Carlo methods? There are interesting questions about quasi-MC, high dimensionality MC, efficient algorithms and defects. Or are you interesting in applying MC to new financial fields? I don't know of any virgin territory, but there is a lot to learn by applying known methods to common problems.

If you want to find out about MC methods in finance, especially for pricing American options, take a look at the book "Monte Carlo Methods in Financial Engineering" by Paul Glasserman. It is really good.

Regarding MC and american options.....check out longstaff's paper on least squares monte carlo. Simple, but kick ass. Can use easily on bermuda swaptions...this is the latest, and for a long time also the last, word on MC for american options. Has gone largely unnoticed which i do not understand.

yes, Longstaff's and Schwartz' regression method kick ass. It is in the book and is also compared with the other MC methods for pricing American options. My questions are:How much is MC methods (like the LSM) used in the marked to price Am options? Are all the methods used or are trees most used?

the last word on monte carlo for standard american options - don't even bother - trees have a much better speed/accuracy trade-off

yes, of course for standard American optios. But MC methods are better for higher dimensional option contracts (with burn-in time etc).

QuoteOriginally posted by: AaronMonte Carlo methods are used in almost all computationally intensive fields. You have identified the main two in finance: pricing and risk management.Are you interested in research improving Monte Carlo methods? There are interesting questions about quasi-MC, high dimensionality MC, efficient algorithms and defects. Or are you interesting in applying MC to new financial fields? I don't know of any virgin territory, but there is a lot to learn by applying known methods to common problems.Could you please suggest some common problems except pricing American option? Garywind

QuoteOriginally posted by: GarywindQuoteOriginally posted by: AaronMonte Carlo methods are used in almost all computationally intensive fields. You have identified the main two in finance: pricing and risk management.Are you interested in research improving Monte Carlo methods? There are interesting questions about quasi-MC, high dimensionality MC, efficient algorithms and defects. Or are you interesting in applying MC to new financial fields? I don't know of any virgin territory, but there is a lot to learn by applying known methods to common problems.Could you please suggest some common problems except pricing American option? GarywindJust to name a few:Speed and effectiveness in pricing and variance reduction will always remain a huge issue. Such is the research of FFT, FGT, and wavelets application in pricing for speed and efficiency.Somewhat related to monte carlo is the problem of generating multi-dimensional random numbers quick and accurately.Similar to American option (optimal exercise problems), Prepayment speeds (optimal point for refi) of Mortgages is still an on-going research.

Hi tabris,Thank you very much. I am going to have look on these topics.Gary

Wouldn't research in how to avoid using MC techniques be more to the point? MC's speed and accuracy (let alone greek's) are incredibly bad