Option Pricing Theory

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• Option Pricing Theory — Any model or theory based approach for calculating the fair value of an option. The most commonly used models today are the Black Scholes model and the binomial model. Both theories on options pricing have wide margins for error because their… …   Investment dictionary

• Monte Carlo methods for option pricing — In mathematical finance, a Monte Carlo option model uses Monte Carlo methods to calculate the value of an option with multiple sources of uncertainty or with complicated features. [1] The term Monte Carlo method was coined by Stanislaw Ulam in… …   Wikipedia

• Option (finance) — Stock option redirects here. For the employee incentive, see Employee stock option. Financial markets Public market Exchange Securities Bond market Fixed income …   Wikipedia

• Pricing — is one of the four p s of the marketing mix. The other three aspects are product, promotion, and place. It is also a key variable in microeconomic price allocation theory.Price is the only revenue generating element amongst the 4ps,the rest being …   Wikipedia

• Rational pricing — is the assumption in financial economics that asset prices (and hence asset pricing models) will reflect the arbitrage free price of the asset as any deviation from this price will be arbitraged away . This assumption is useful in pricing fixed… …   Wikipedia

• Capital asset pricing model — In finance, the Capital Asset Pricing Model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well diversified portfolio, given that asset s non diversifiable… …   Wikipedia

• Employee stock option — An employee stock option is a call option on the common stock of a company, issued as a form of non cash compensation. Restrictions on the option (such as vesting and limited transferability) attempt to align the holder s interest with those of… …   Wikipedia

• Ruin theory — Ruin theory, sometimes referred to as collective risk theory, is a branch of actuarial science that studies an insurer s vulnerability to insolvency based on mathematical modeling of the insurer s surplus.The theory permits the derivation and… …   Wikipedia

• Congestion pricing — Typical traffic congestion in an urban freeway. Shown here I 80 Eastshore Freeway, Berkeley, United States …   Wikipedia

• Binary option — In finance, a binary option is a type of option where the payoff is either some fixed amount of some asset or nothing at all. The two main types of binary options are the cash or nothing binary option and the asset or nothing binary option. The… …   Wikipedia

• Martingale pricing — is a pricing approach based on the notions of martingale and risk neutrality. The martingale pricing approach is a cornerstone of modern quantitative finance and can be applied to a variety of derivatives contracts, e.g. options, futures,… …   Wikipedia

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