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Black-Scholes and beyond: Option pricing models

Black-Scholes and beyond: Option pricing models

Black-Scholes and beyond: Option pricing models. Ira Kawaller, Neil A. Chriss

Black-Scholes and beyond: Option pricing models


Black.Scholes.and.beyond.Option.pricing.models.pdf
ISBN: 0786310251,9780786310258 | 0 pages | 5 Mb


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Black-Scholes and beyond: Option pricing models Ira Kawaller, Neil A. Chriss
Publisher: MGH




A specific model is not specified, but the most widely used is the Black-Scholes model. The strike price is a known obligation. A long long time ago, before Black Monday in 1987, people didn't know how to price options. The unknown value above/below that fixed price is beyond the control of the company and is therefore a contingent (off-balance-sheet) liability. May 31, 2009 - This Demonstration shows the values of vanilla European options in a model based on fractional Brownian motion and on ordinary geometric Brownian motion (the Black–Scholes model). Then Black-Scholes came out and traders started using the Black-Scholes (BS) formula and it worked pretty well, . In spite of its having attractive properties as a model for the stock exchange, the suitability of fractional Brownian motion for option pricing is controversial. Dec 8, 2008 - Long Term Capital Management (LTCM) went down because they became too big in simple trades that were about as related to option pricing as they were to the dividend discount model or the Fisher equation, and eventually the market had them by the balls, because Thus, perhaps Merton and Scholes let themselves be used by people who took too much risk, but the validity of the Black-Scholes/Merton option model was independent of LTCM's business model. How he thinks this is beyond me, seeing as the whole criticism is that policies designed by economists had a hand in causing the crash. Apr 5, 2013 - The Black-Scholes model is named for Fischer Black and Myron Scholes, who together published a scholarly paper in 1973 explaining their theory. Guasoni, "No Arbitrage under Transaction Costs, with Fractional Brownian Motion and Beyond," Math. Feb 13, 2013 - One example of a consistent theory is the Black-Scholes option pricing model. Why is it the holy grail of finance equations? The Black-Scholes option-pricing model is a good academic exercise that works better for traded options than stock options. I found this great resource the other day, explaining the equation at a very high level: A Beginner's Guide To The Black-Scholes Option Pricing Formula. And Black-Scholes doesn't work quite right; it doesn't describe the way volatility behaves. Mar 12, 2012 - which is about models that go beyond Black-Scholes, that try to explain the nature of option pricing in equity derivatives. By using an option-pricing model. The calculation is beyond the scope of this book; however, it is designed to take into account the elements of time value, stock price variation, an assumed market rate of interest, and time remaining until expiration. It turns out that the volatility smile comes in different shapes and forms. Apr 6, 2006 - This smile flies in the face of the original assumptions of the Black-Scholes option pricing model.

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