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Paper / 1994SMQ / 203729120727996
Real-world options: smile and residual risk
Didier Sornette / Giulia Iori / Jean-Philippe Bouchaud
option pricing / options hedgingResource overview

Real-world options: smile and residual risk

Paper1994

by Didier Sornette, Giulia Iori, Jean-Philippe Bouchaud

Tags
option pricingoptions hedging

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Suggested foundations for options and derivatives 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.

Go further

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

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

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