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Advanced Option Pricing Models

Advanced Option Pricing Models


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About the Book

Options trading is a sophisticated, high-stakes endeavor where accurate pricing is key to success. Unfortunately, the standard Black-Scholes pricing model, while highly useful, is not completely accurate and tends to break down under certain market conditions. Traders are then placed in the uncomfortable position of attempting to trade with inaccurate prices. Since most traders rely on the Black-Scholes model, the trader who understands this pricing discrepancy and who can discover the true and correct price of an option holds a distinct advantage over other traders. Advanced Option Pricing Models is the book that gives traders that advantage. Advanced Option Pricing Models is a practical, how-to book that shows the step-by-step process to build better, more accurate option pricing models. The new models remedy the flaws of the standard models. In parts I and II, the authors show the reader the conditions under which Black-Scholes and other popular pricing models fail to provide good price estimates, comparing the actual behavior and prices of options in the market with the prices given by the standard pricing models. The authors then provide a detailed analysis of why those differences exist. In Part III, the authors develop several models - in a step-by-step fashion - that are more accurate and give better pricing under a wider range of market conditions. These are extremely practical and truly tradable models that can be put into immediate use by traders. The models are illustrated using trades from the authors' own trading records. While being practical and hands on, Advanced Option Pricing Models also provides the mathematical logic and theory supporting the models. Based on solid, research-based information, the model building steps cover options pricing: - Under conditional or marginal distributions - Using polynomial approximations - Using "curve fitting" - Compensating for mean reversion Advanced Option Pricing Models provides advanced and sophisticated option pricing models for traders that gives them the edge over traders still relying on older, less accurate pricing models.

About the Author :
Jeffrey Katz is founder and president of Scientific Consultants Services, Inc., a firm which provides custom programming and publicly available software for traders. He specializes in applying artificial intelligence technologies to trading and has developed two AI-based trading software programs, N-TRAIN and LOGINVOLVE. He has published a number of articles in Technical Analysis of Stocks and Commodities, PC II, and Neuro Ve$t Journal. He wrote two chapters in the book, Virtual Trading. He holds a masters degree in mathematics and a Ph.D. in psychophysiology from the University of Lancaster in England. He is a member of MENSA. Donna McCormick is vice president of Scientific Consultants Services, Inc. She specializes in the design of trading systems using Omega Research's products, the leading provider of system development tools in the trading industry. She has co-written several articles for Technical Analysis of Stocks and Commodities.


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Product Details
  • ISBN-13: 9780071406055
  • Publisher: McGraw-Hill Education - Europe
  • Publisher Imprint: McGraw-Hill Professional
  • Language: English
  • Returnable: N
  • ISBN-10: 0071406050
  • Publisher Date: 16 Mar 2005
  • Binding: Hardback
  • No of Pages: 450


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