The standard deviation of the values of an option calculated using 10,000 Monte Carlo trials is 4.5.The average of the values is 20.What is the standard error of this as an estimate of the option price?
A) 4.5
B) 0.45
C) 0.045
D) 0.0045

Question

Quizplus · Accepted Answer

The standard deviation of 20 as an estimate of the price is the standard deviation of the calculated values divided by the square root of the number of trials.In this case the square root of the number of trials is 100 and so the standard error of the price estimate is 4.5/100 or 0.045.

The Standard Deviation of the Values of an Option Calculated