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Results tagged with black-scholes
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user 2161
Black-Scholes is a mathematical model used for pricing options.
1
vote
Accepted
Self-financing and Black-Scholes-Merton formula
OK, I think now I got the point, after comparing to Shreve's "Stochastic calculus for finance I, The binomial asset pricing model", the simpler case.
The pricing theory in continuous time is:
Defi …
- 2,231
15
votes
6
answers
8k
views
Self-financing and Black-Scholes-Merton formula
Self-financing is an important concept in financial product replicating, normally used in pricing.
I read about several ways to derive Black-Scholes-Merton (BSM) formula. Seems some approaches actua …
- 2,231
2
votes
American Swaption Pricing with Monte-Carlo method
American options pricing (swaption is just a kind of option) is a bit tricky due to the early exercise. Here is a page listing possible approaches, including some numeric methods, and some close form …
- 2,231
10
votes
3
answers
785
views
Is it possible to demonstrate that one pricing model is better than another?
Take the classic GBM (geometric Brownian motion) model for equities as an example:
ds = mu * S * dt + sigma * S * dW.
It is the basis for the classic Black-Scholes formula.
The model says volatili …
- 2,231