# Questions tagged [option-pricing]

Questions about models for the valuation of option contracts.

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### How to price a risk reversal for common dice gain with chance to re-roll

I was just thinking about an extension to the common dice throwing interview expected value question: Question: Imagine a game where you throw a die and get a payoff equal to the number shown by the ...
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### Independent variable in pricing of strongly path dependent options

I am reading Paul Wilmott on quantatative finance where he discuss the pricing of strongly path dependent options.The payoff at expiry T depends on the path taken by the asset in the sense that it ...
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### Valuation of non-deliverable option

What is the difference between valuation of deliverable and non-deliverable European options? I am not asking settlement-wise, but daily valuation. Will Black-Scholes be used for both?
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### Exotics - Combination of different payoffs using Black-Scholes

I'm currently struggling with the derivation of a formula to price the following exotic option with Black-Scholes. The option has the maximum payoff of $(S_T-z)$ and $(y - S_T)$, where $S_T$ is the ...
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### Bergomi's model normalisation

On his book https://www.amazon.fr/dp/B019FNKQS8/ref=dp_kinw_strp_1 Bergomi derives a multifactor mean reversible volatility of the volatility such that : \begin{equation*} d \xi_{t}^{T}=\omega(\tau) \...
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### Understanding Monte Carlo to solve option price with local volatility

I have read this question pricing using dupire local volatility model which seems to have an answer from here https://www.csie.ntu.edu.tw/~d00922011/python/cases/LocalVol/DUPIRE_FORMULA.PDF Both of ...
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### Why does volatility increase the expense of delta-hedging?

Consider someone that writes a call, and wishes to delta-hedge against it to remain delta neutral. For this to be profitable, the price they sell this option for should be greater than or equal to the ...
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### Why does bull call spread shows higher payoff than bull put spread?

I am trying to compare bull call spread and bull put spread for equity index option. For the options where the put call parity holds, I am getting a different payoff for bull call spread and bull put ...
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### How to derive a pricing PDE for an asset that follows a mean-reverting process?

I want to derive a Black-Scholes type partial differential equation to price options on an asset that follows a mean-reverting process (Schwartz model). My attempt follows the methodology of deriving ...