Options pricing is the task of determining the fair value of a particular option, given a set of parameters that exactly determine the features of the option contracts, such as its expiration date, current volatility, and prevailing interest rates. Pricing options requires the use of efficient algorithms, because of frequent changes in prices and market volatility. For this reason, a number of models have been employed for this task in the area of quantitative finance.
This chapter discusses some of the most popular models for options pricing. First, there ...
