Abstract
Basic types of options are explained. The binomial method is described as a first and widely applicable method for pricing options. Stochastic background for modeling is introduced, with a focus on diffusion models, which include geometric Brownian motion and mean reversion stochastic processes. The Ito-lemma is applied and jump diffusion is discussed. The chapter ends with reflections on calibration.
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© 2012 Springer-Verlag London Limited
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Seydel, R.U. (2012). Modeling Tools for Financial Options. In: Tools for Computational Finance. Universitext. Springer, London. https://doi.org/10.1007/978-1-4471-2993-6_1
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DOI: https://doi.org/10.1007/978-1-4471-2993-6_1
Publisher Name: Springer, London
Print ISBN: 978-1-4471-2992-9
Online ISBN: 978-1-4471-2993-6
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