Investigating the Cloud Computing Business Framework (CCBF ...

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Monte Carlo Methods (MCM) Part 1 • MCM, Capital Asset Models and Binomial Model etc are studied. Most commonly used method for finance is MCM, that’s why it’s chosen. We use MCM for pricing calculation. • MATLAB is used due to its ease of use with relatively good speed. While the volatility is known and provided, prices for buy and sale can be calculated. • The following code demonstrates calculation of prices. Call prices are for buy and put prices are for sale. > fareastmc [LowerLimit MCPrice UpperLimit] Call Prices: [4.196694 4.248468 4.300242] Put Prices: [7.610519 7.666090 7.721662] • MCM application is in the form of a VBA Excel program to calculate the best call and put prices. For example, Spot Price = 100; Strike Price = 105; Volatility = 0.1; Risk free rate = 0.05, Option Maturity = 1; Time steps = 10 and Number of simulations are 10000. The VBA Excel program will calculate the best call price as 4.009, and best put price as 3.903.
Monte Carlo Methods (MCM) Part 2 Key advantages: •A large number of simulations can be calculated in one go; eg 100,000. •MCM have been widely used and proven in many cases. Calculations are close to reality if key data such as volatility, risk free rate etc are known. •Speed, accuracy and portability can be demonstrated. See core part of a code. • MCM are used in Operational Risk and models are used to simulate the operational risks in Commonwealth Bank, Australia (CBA). • MCM simulations are written in Fortran and C#. Such simulations may take several hours or over a day. Results are useful for banks. • For our work, we use Variance-Gamma (VG) Processes (a specific technique in MCM) to be used for experiments and benchmark in the clouds. • VG processes are suitable in reducing errors apart from fast calculations. Details for VG processes and its experimental results in Public and Private Clouds are in slide 8-10.
Page 1 and 2: Investigating the Cloud Computing B
Page 3 and 4: Technical and Business Challenges L
Page 5: Cloud Computing Business Framework
Page 9 and 10: Experiments in Clouds Part 1 • 1
Page 11 and 12: Experiments in Clouds Part 3 time t
Page 13 and 14: Three implications for Banking •
Page 15 and 16: An example in Private Clod: 6-core
Page 17 and 18: Appendix: An example in Monte Carlo

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