Complete Guide to Option Pricing Formulas

ISBN-10: 0071389970

ISBN-13: 9780071389976

Edition: 2nd 2007 (Revised)

Authors: Espen Gaarder Haug

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Long-established as a definitive resource by Wall Street professionals, "The Complete Guide to Option Pricing Formulas" has been revised and updated to reflect the realities of today's options markets. The Second Edition contains a complete listing of virtually every pricing formula_ all presented in an easy-to-use dictionary format, with expert author commentary and ready-to-use programming code. The Second Edition of this classic guide now includes more than 60 new option models and formulas... extensive tables providing an overview of all formulas... new examples and applications... and an updated CD containing all pricing formulas, with VBA code and ready-to-use Excel spreadsheets. The volume also features several new chapters covering such things as: option sensitivities, discrete dividend, commodity options, and two chapters on numerical methods covering trees, finite difference and Monte Carlo Simulation. The new edition of "The Complete Guide to Option Pricing Formulas" offers quick access to: Options Pricing Overview Black-Scholes-Merton Black-Scholes-Merton Greeks Analytical Formulas for American Options Exotic Options Single Asset Exotic Options on Two Assets Black-Scholes-Merton Adjustments and Alternatives Trees and Finite Difference Methods Monte Carlo Simulation Options on Stocks that Pay Discrete Dividends Commodity and Energy Options Interest Rate Derivatives Volatility and Correlation Distributions Some Useful Formulas: Interpolation, Interest Rates, and Risk-Reward Measures This all-in-one options pricing guide contains a numerical example or a table with values for each option pricing formula. The book also includes a helpful glossary ofnotations, as well as an extensive bibliography of related books and articles.
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Book details

List price: $70.00
Edition: 2nd
Copyright year: 2007
Publisher: McGraw-Hill Companies, The
Publication date: 1/8/2007
Binding: Hardcover
Pages: 492
Size: 7.75" wide x 9.50" long x 1.50" tall
Weight: 0.990
Language: English

What Is New in the Second Edition?
Option Pricing Formulas Overview
Glossary of Notations
The Black-Scholes Option Pricing Formula
Options on Stock Indexes
Options on Futures
Margined Options on Futures
Currency Options
The Generalized Black-Scholes-Merton Option Pricing Formula
Parities and Symmetries
Put-Call Parity for European Options
At-the-Money Forward Value Symmetry
Put-Call Symmetry
Put-Call Supersymmetry
Black-Scholes-Merton on Variance Form
Before Black-Scholes-Merton
The Bachelier Model
The Sprenkle Model
The Boness Model
The Samuelson Model
Appendix A: The Black-Scholes-Merton PDE
Ito's Lemma
Dynamic Hedging
Black-Scholes-Merton Greeks
Delta Greeks
Delta Mirror Strikes and Assets
Strike from Delta
Futures Delta from Spot Delta
DdeltaDvol and DvegaDspot
DdeltaDtime, Charm
Gamma Greeks
Maximal Gamma and the Illusions of Risk
Gamma Symmetry
DgammaDvol, Zomma
DgammaDspot, Speed
DgammaDtime, Color
Vega Greeks
Vega Symmetry
Vega-Gamma Relationship
Vega from Delta
Vega Leverage, Vega Elasticity
DvegaDvol, Vomma
DvommaDvol, Ultima
Variance Greeks
Variance Vega
Variance Vomma
Variance Ultima
Volatility-Time Greeks
Theta Greeks
Theta Symmetry
Rho Greeks
Carry Rho
Probability Greeks
In-the-Money Probability
Risk-Neutral Probability Density
From in-the-Money Probability to Density
Probability of Ever Getting in-the-Money
Greeks Aggregations
Net Weighted Vega Exposure
At-the-Money Forward Approximations
Approximation of the Black-Scholes-Merton Formula
Numerical Greeks
First-Order Greeks
Second-Order Greeks
Third-Order Greeks
Mixed Greeks
Third-Order Mixed Greeks
Greeks from Closed-Form Approximations
Appendix B: Taking Partial Derivatives
Analytical Formulas for American Options
The Barone-Adesi and Whaley Approximation
The Bjerksund and Stensland (1993) Approximation
The Bjerksund and Stensland (2002) Approximation
Put-Call Transformation American Options
American Perpetual Options
Exotic Options-Single Asset
Variable Purchase Options
Executive Stock Options
Moneyness Options
Power Contracts and Power Options
Power Contracts
Standard Power Option
Capped Power Option
Powered Option
Log Contracts
Log(S) Contract
Log Option
Forward Start Options
Fade-in Option
Ratchet Options
Reset Strike Options-Type 1
Reset Strike Options-Type 2
Time-Switch Options
Chooser Options
Simple Chooser Options
Complex Chooser Options
Options on Options
Put-Call Parity Compound Options
Compound Option Approximation
Options with Extendible Maturities
Options That Can Be Extended by the Holder
Writer-Extendible Options
Lookback Options
Floating-Strike Lookback Options
Fixed-Strike Lookback Options
Partial-Time Floating-Strike Lookback Options
Partial-Time Fixed-Strike Lookback Options
Extreme-Spread Options
Mirror Options
Barrier Options
Standard Barrier Options
Standard American Barrier Options
Double-Barrier Options
Partial-Time Single-Asset Barrier Options
Look-Barrier Options
Discrete-Barrier Options
Soft-Barrier Options
Use of Put-Call Symmetry for Barrier Options
Barrier Option Symmetries
First-Then-Barrier Options
Double-Barrier Option Using Barrier Symmetry
Dual Double-Barrier Options
Binary Options
Gap Options
Cash-or-Nothing Options
Asset-or-Nothing Options
Supershare Options
Binary Barrier Options
Double-Barrier Binary Options
Double-Barrier Binary Asymmetrical
Asian Options
Geometric Average-Rate Options
Arithmetic Average-Rate Options
Discrete Arithmetic Average-Rate Options
Equivalence of Floating-Strike and Fixed-Strike Asian Options
Asian Options with Volatility Term-Structure
Exotic Options on Two Assets
Relative Outperformance Options
Product Options
Two-Asset Correlation Options
Exchange-One-Asset-for-Another Options
American Exchange-One-Asset-for-Another Option
Exchange Options on Exchange Options
Options on the Maximum or the Minimum of Two Risky Assets
Spread-Option Approximation
Two-Asset Barrier Options
Partial-Time Two-Asset Barrier Options
Margrabe Barrier Options
Discrete-Barrier Options
Two-Asset Cash-or-Nothing Options
Best or Worst Cash-or-Nothing Options
Options on the Minimum or Maximum of Two Averages
Currency-Translated Options
Foreign Equity Options Struck in Domestic Currency
Fixed Exchange Rate Foreign Equity Options
Equity Linked Foreign Exchange Options
Takeover Foreign Exchange Options
Greeks for Two-Asset Options
Black-Scholes-Merton Adjustments and Alternatives
The Black-Scholes-Merton Model with Delayed Settlement
The Black-Scholes-Merton Model Adjusted for Trading Day Volatility
Discrete Hedging
Hedging Error
Discrete-Time Option Valuation and Delta Hedging
Discrete-Time Hedging with Transaction Cost
Option Pricing in Trending Markets
Alternative Stochastic Processes
Constant Elasticity of Variance
Skewness-Kurtosis Models
Definition of Skewness and Kurtosis
The Skewness and Kurtosis for a Lognormal Distribution
Jarrow and Rudd Skewness and Kurtosis Model
The Corrado and Su Skewness and Kurtosis Model
Modified Corrado-Su Skewness-Kurtosis Model
Skewness-Kurtosis Put-Call Supersymmetry
Skewness-Kurtosis Equivalent Black-Scholes-Merton Volatility
Gram Charlier Density
Skewness-Kurtosis Trees
Pascal Distribution and Option Pricing
Jump-Diffusion Models
The Merton Jump-Diffusion Model
Bates Generalized Jump-Diffusion Model
Stochastic Volatility Models
Hull-White Uncorrelated Stochastic Volatility Model
Hull-White Correlated Stochastic Volatility Model
The SABR Model
Variance and Volatility Swaps
Variance Swaps
Volatility Swaps
More Information
Trees and Finite Difference Methods
Binomial Option Pricing
Cox-Ross-Rubinstein American Binomial Tree
Greeks in CRR Binomial Tree
Rendleman Bartter Binomial Tree
Leisen-Reimer Binomial Tree
Convertible Bonds in Binomial Trees
Binomial Model with Skewness and Kurtosis
Trinomial Trees
Exotic Options in Tree Models
Options on Options
Barrier Options Using Brownian Bridge Probabilities
American Barrier Options in CRR Binomial Tree
European Reset Options Binomial
American Asian Options in a Tree
Three-Dimensional Binomial Trees
Implied Tree Models
Implied Binomial Trees
Implied Trinomial Trees
Finite Difference Methods
Explicit Finite Difference
Implicit Finite Difference
Finite Difference in ln(S)
The Crank-Nicolson Method
Monte Carlo Simulation
Standard Monte Carlo Simulation
Greeks in Monte Carlo
Monte Carlo for Callable Options
Two Assets
Three Assets
N Assets, Cholesky Decomposition
Monte Carlo of Mean Reversion
Generating Pseudo-Random Numbers
Variance Reduction Techniques
Antithetic Variance Reduction
IQ-MC/Importance Sampling
IQ-MC Two Correlated Assets
Quasi-Random Monte Carlo
American Option Monte Carlo
Options on Stocks That Pay Discrete Dividends
European Options on Stock with Discrete Cash Dividend
The Escrowed Dividend Model
Simple Volatility Adjustment
Haug-Haug Volatility Adjustment
Bos-Gairat-Shepeleva Volatility Adjustment
Non-Recombining Tree
Black's Method for Calls on Stocks with Known Dividends
The Roll, Geske, and Whaley Model
Benchmark Model for Discrete Cash Dividend
A Single Dividend
Multiple Dividends
Options on Stocks with Discrete Dividend Yield
European with Discrete Dividend Yield
Closed-Form American Call
Recombining Tree Model
Commodity and Energy Options
Energy Swaps/Forwards
Energy Options
Options on Forwards, Black-76F
Energy Swaptions
Hybrid Payoff Energy Swaptions
The Miltersen-Schwartz Model
Mean Reversion Model
Interest Rate Derivatives
FRAs and Money Market Instruments
FRAs From Cash Deposits
The Relationship between FRAs and Currency Forwards
Convexity Adjustment Money Market Futures
Simple Bond Mathematics
Dirty and Clean Bond Price
Current Yield
Modified Duration and BPV
Bond Price and Yield Relationship
Price and Yield Relationship for a Bond
From Bond Price to Yield
Pricing Interest Rate Options Using Black-76
Options on Money Market Futures
Price and Yield Volatility in Money Market Futures
Caps and Floors
Swaption Volatilities from Caps or FRA Volatilities
Swaptions with Stochastic Volatility
Convexity Adjustments
European Short-Term Bond Options
From Price to Yield Volatility in Bonds
The Schaefer and Schwartz Model
One-Factor Term Structure Models
The Rendleman and Bartter Model
The Vasicek Model
The Ho and Lee Model
The Hull and White Model
The Black-Derman-Toy Model
Volatility and Correlation
Historical Volatility
Historical Volatility from Close Prices
High-Low Volatility
High-Low-Close Volatility
Exponential Weighted Historical Volatility
From Annual Volatility to Daily Volatility
Confidence Intervals for the Volatility Estimate
Volatility Cones
Implied Volatility
The Newton-Raphson Method
The Bisection Method
Implied Volatility Approximations
Implied Forward Volatility
From Implied Volatility Surface to Local Volatility Surface
Confidence Interval for the Asset Price
Basket Volatility
Historical Correlation
Distribution of Historical Correlation Coefficient
Implied Correlations
Implied Correlation from Currency Options
Average Implied Index Correlation
Various Formulas
Probability of High or Low, the Arctangent Rule
Siegel's Paradox and Volatility Ratio Effect
The Cumulative Normal Distribution Function
The Hart Algorithm
Polynomial Approximations
The Inverse Cumulative Normal Distribution Function
The Bivariate Normal Density Function
The Cumulative Bivariate Normal Distribution Function
The Trivariate Cumulative Normal Distribution Function
Some Useful Formulas
Linear Interpolation
Log-Linear Interpolation
Exponential Interpolation
Cubic Interpolation: Lagrange's Formula
Cubic-Spline Interpolation
Two-Dimensional Interpolation
Interest Rates
Future Value of Annuity
Net Present Value of Annuity
Continuous Compounding
Compounding Frequency
Zero-Coupon Rates from Par Bonds/Par Swaps
Risk-Reward Measures
Treynor's Measure
Sharpe Ratio
Confidence Ratio
Sortino Ratio
Burke Ratio
Return on VaR
Jensen's Measure
Appendix C: Basic Useful Information
The Option Pricing Software
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