An Implementation of Binomial Method of Option Pricing using Parallel Computing
The Binomial method of option pricing is based on iterating over discounted option payoffs in a recursive fashion to calculate the present value of an option. Implementing the Binomial method to exploit the resources of a parallel computing cluster is non-trivial as the method is not easily parallelizable. The authors propose a procedure to transform the method into an "Embarrassingly parallel" problem by mapping Binomial probabilities to Bernoulli paths. They have used the parallel computing capabilities in R with the Rmpi package to implement the methodology on the cluster tara in the UMBC High Performance Computing Facility, which has 82 compute nodes with two quad-core Intel Nehalem processors and 24 GB of memory on a quad-data rate InfiniBand interconnect.