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Paper / 2025SMQ / 230886403668800
Path-dependent, ESG-valued, option pricing in the Bachelier-Black-Scholes-Merton model
Bhathiya Divelgama / Blessing Omotade / Nancy Asare Nyarko / Svetlozar T. Rachev / W. Brent Lindquist
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Path-dependent, ESG-valued, option pricing in the Bachelier-Black-Scholes-Merton model

Paper2025

by Bhathiya Divelgama, Blessing Omotade, Nancy Asare Nyarko, Svetlozar T. Rachev, W. Brent Lindquist

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derivativesesgmathematical financeoption pricingstochastic processes

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Suggested foundations for options and derivatives pricing and stochastic processes and pricing. Specialist prerequisites vary by paper.

Before you read

  1. The Binomial Model

    Build replication and risk-neutral probabilities in a tractable model.

  2. Market Model and Risk-Neutral Valuation

    Distinguish pricing probabilities from physical forecasts.

  3. Conditional Expectation

    Understand what it means to condition on current information.

  4. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow Brownian dynamics and the second-order term in Itô calculus.

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  1. The Black-Scholes PDE, Formula and Implied Volatility

    Connect the pricing equation, closed-form value and implied volatility.

  2. Simulating SDEs

    Translate continuous dynamics into a numerical experiment.

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