Black Scholes and Beyond: Option Pricing Models
An unprecedented book on option pricing! For the first time, the basics on modern option pricing are explained ``from scratch'' using only minimal mathematics. Market practitioners and students alike will learn how and why the Black-Scholes equation works, and what other new methods have been developed that build on the success of Black-Shcoles. The Cox-Ross-Rubinstein binomial trees are discussed, as well as two recent theories of option pricing: the Derman-Kani theory on implied volatility trees and Mark Rubinstein's implied binomial trees. Black-Scholes and Beyond will not only help the reader gain a solid understanding of the Balck-Scholes formula, but will also bring the reader up to date by detailing current theoretical developments from Wall Street. Furthermore, the author expands upon existing research and adds his own new approaches to modern option pricing theory. Among the topics covered in Black-Scholes and Beyond: detailed discussions of pricing and hedging options; volatility smiles and how to price options ``in the presence of the smile''; complete explanation on pricing barrier options.
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STOCKS OPTIONS AND FUTURES
FUNDAMENTAL MATHEMATICAL CONCEPTS
THE GEOMETRIC BROWN1AN MOTION MODEL OF PRICE MOVE
10 other sections not shown
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American options Arrow-Debreu price asset assume assumption backward induction barrier options binomial model binomial tree Black-Scholes formula Brownian motion model Chapter compute the value Cox-Ross-Rubinstein delta discuss displays dividend payments dividend yield equal equation European call option European options ex-dividend date example expected return expected value Figure flip forward contract forward price gamma geometric Brownian motion given graph hedge parameters hedging strategy implied binomial trees implied volatility trees input interest rate investment investor local volatility market price mean method normal distribution number of periods option expires option pricing option value tree outcomes path payout price options put option random event random variable rate of interest rate of return ratio rebalancing represents risk risk-free rate risk-neutral riskless Rubinstein Scholes self-financing shares short position spot price standard deviation step stock price movements stock price tree strike price Suppose terminal nodes theta tion transition probability trees model underlying vega volatility smile zero
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