# Questions tagged [option-pricing]

Questions about models for the valuation of option contracts.

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### SVI model and Greeks calculation

The option pricing model I am referring to is this one: Arbitrage-free SVI volatility surfaces I calibrated that model by using a set of European options, now I have a set of 5 parameters per ...
72 views

### Why would you take a Loan when trying to Illustrate a Riskless Hedge?

I'm reading an article trying to derive option pricing with a simple approach, but I got stuck. In the second paragraph of this article (Name – Options Pricing: A Simplified Approach), which takes ...
104 views

### Uncertain Volatility Model - Option Pricing R code help

I am trying to price the following call option using the UVM method in R. The code I wrote below keeps producing the same price for the min and max volatilities, which is wrong, however, I can't seem ...
1 vote
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### Early exercise with multiple dividends

I am wondering how early exercise conditions work on multiple dividends. Say a stock pays 4 dividends in a year. We are 1 day before the first ex-div date and long an ITM Call and ITM put in an expiry ...
39 views

### Arbitrage between one touch option and vanilla option

I recently came across this question, which is if you have a one touch option which the market has priced in X% of touching the barrier, and a vanilla call option on the same underlying and maturity ...
103 views

### Reconstructing the CRR model knowing put and call prices

In an arbitrage-free single-period CRR model, the following options on a share are offered: [They are all European] (i) Call option at strike price $100$, price: $C_{0,1}=7.44$ (ii) Call option at ...
24 views

### Approximation of an Autocall (trigger 100%) with ATM options prices

thank you very much for trying to answer this question, and I hope it will be helpful to everyone in my situation. I am preparing for an interview, and I've come across these three questions on the ...
30 views

### Option pricing model adjustments in practice

I’m trying to understand significant differences in theoretical options pricing data that I‘m seeing. I’m new to this, so I suspect I’m missing something obvious. Taking a fixed set of inputs 1, when ...
64 views

### Proof of the value of an option using hedging and no-arbitrage [ Paul Wilmott Chapter 3.12.2]

I encounter a difficulty in understanding the proof of finding the value of an option. Before going into the proof, let's talk above the assumptions and parameters of the model. Assume that we know ...
1 vote
300 views

### Hedging exotic options

How can exotic and other path dependent, such as asian options be hedged? For example in the case of an asian option, what is the replicating portfolio: what instruments to keep in it and “how much”? ...
97 views

### Up and Down Multiplicative Factors of the Binomial Option Pricing Model

When computing these factors, according to some sources, $u=e^{r\Delta t+\sigma \sqrt{\Delta t}}$, where $r$ is the risk-free interest rate, $T$ is the time for maturity, and $\sigma$ is the ...
70 views

### Intuition behind short 1/2 stock in option value - Paul Wilmott Quant Finance Chapter 3.3

I don't get the intuition behind the construction of long option + short 1/2 stock portfolio for finding the value of an option using binomial model. In Paul Wilmott ...
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### How to and What is the price of an American call option for non-dividend stock?

I want to know how to price an American call option for non-dividend stock (with concrete and simple binomial pricing model, with risk neutral assumption). I understand that for an European call ...