A unified development of the subject, presenting the theory of options in each of the different forms and stressing the equivalence between each of the methodologies.
* Demystifies some of the more complex topics.
* Derives practical, tangible results using the theory, to help practitioners in problem solving.
* Applies the results obtained to the analysis and pricing of options in the equity, currency, commodity and interest rate markets.
* Gives the reader the analytical tools and technical jargon to understand the current technical literature available.
* Provides a user-friendly reference on option theory for practicing investors and traders.
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American option analytical Appendix arbitrage asset average barrier options binomial model binomial tree Black Scholes equation Black Scholes formula Black Scholes model boundary conditions Brownian motion calculated cash chapter commodity convergence curve deﬁned delta derivative differential equation discounted discrete distribution function e−rT equal European option example exercise ﬁrst forward contract forward price fStt futures contract given gives graph Green’s function heat equation hedge implied volatilities integral interest rate Ito’s lemma knock-out last equation last section last subsection lognormal distribution martingale maturity method Monte Carlo node normal distribution notation number of steps obtained option price option theory particle payoff portfolio position probability measure put option random numbers random variable reader risk-neutral simple solution solve standard normal stochastic calculus stock price strategy strike price Substituting theorem trinomial underlying stock variance written zero