Back in the mid 90's I used the Black-Scholes Model and the Cox-Ross-Rubenstein (Binomial) Model's to price Options. That was nearly 15 years ago and I was wondering if there are any new models being used to price Options?
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Black-Scholes itself didn't change a lot but we can now adjust it to deal with a lot more complicated factors to price more complicated contracts:
Other methods (computing intensive) have also evolved to deal with various types of contracts where BS is not very appropriate choice (e.g. Monte Carlo simulation for path-dependant options). |
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Maybe you think about other model than a diffusion ? There is an article on wilmott.com about the Korn-Kreer-Lenssen Model. |
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There are plenty of other models You can also add all the exponential Lévy processes with or without time change and also other stochastic volatility models such as SABR. I must add that there exist a paradigm different of the "risk neutral pricing" (mainly developped by Platen and Heath) called "Benchmark Pricing" and which is in a way (that I do not fully understand yet), more general than "Risk Neutral paradigm". The biggest problem being that calculation and determination of the benchmark protfolio doesn't seem easy to achieve in this "supermartingale framework". Regards |
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