Customer Reviews

Basic Black-Scholes: Option Pricing and Trading

5 star:		(7)
4 star:		(2)
3 star:		(0)
2 star:		(0)
1 star:		(0)

 

 

Tremendously valuable book for its selection and excellent treatment of many rarely addressed aspects of financial derivatives and the care with which intuition for these aspects is developed.

Financial mathematics exists at the intersection of many different fields, yielding many possible perspectives from which to teach and learn about this discipline. Many of these perspectives bog down in the rigor of their respective fields. Such approaches render it difficult to absorb and apply core concepts without spending a great deal of time in first learning topics such as advanced probability theory and stochastic calculus.

Dr. Crack's approach seems to be to develop the intuition as a framework for understanding further advanced study, should it be warranted by the reader. At the same time, he includes many aspects of the underlying science to help bridge the gap between the academic world and the world of trading.

For example, his derivation of the solution to the Black-Scholes equation and subsequent analysis of the components of the solution leaves the reader fully prepared to quickly and intelligently grasp the impact of changes in assumptions. This is in contrast to many treatments that seem to stop at the solution, leaving the reader feeling as though the Black-Scholes solution is simply a black-box with no intuitive connection to the real world.

This is an excellent introduction to option pricing, with a great deal of both analytical and practical information. While there is a lot of mathematics (obviously), the logical progression of topics and easy to read text make it quite accessible. Intuition and reasoning are used in conjunction with the mathematics to help make somewhat abstract ideas more concrete. Although the focus of the text is on option pricing, several other facets of finance are explored to help illuminate general pricing/investment strategies. This is an easy to follow book with justifications at every step of the way - great for students as well as investors interested in option trading.

This is a good follow-up to Crack's "Heard On the Street" with more practical help for beginners in quantitative finance. It's basically a review of standard options pricing with a lot of Black-Scholes. For me the strength is a lot of conceptual reflection on how the formulas work, what individual terms mean, and how to apply with useful approximations. I was hoping for more case studies of options prices and looking at how stock and options prices interact in the market. This book really doesn't do that. But if you want a derivation of Black-Scholes and thoughtful discussion of terms and parameters this is excellent.

I am a professor of finance at the University of Puerto Rico. Timothy's book was recommended to me by Professor Steve Mann at the University of South Carolina, where I obtained my Ph.D. in finance, as "simply the best book out there on option pricing." What I found when I assigned the book in my MBA class on Futures and Options is that the students all remarked at how incredibly understandable and thorough the book is even though it is clearly useful at the doctoral level as well. This is certainly what I would expect from an MIT Ph.D. where its nearly impossible to get accepted into the doctoral finance program and even harder to get out!

If you really want to understand option pricing get this book...there simply isn't anything else like it out there on the market!

I was generally familiar with options pricing and read this book after the Hull's book on derivatives. I felt that this text definitely provided a lot of good intuition and different perspectives that I have not see anywhere else.

This text helped me systemize my knowledge of options and develop a more intuitive feel for their behavior. Definitely, a good addition to the classics on option pricing.

I have never done a trade before reading this book. At the beginning, it was very hard to understand the whole option idea. The approach is theoretical but Falcon explains it in a very good manner. It took me a lot of time to really understand the whole thing but this book is superior. It really shows you how the options work and how one's movement influences another. It does not give you exact information on how option prices act in different unique situation, but it tells you the most important, how they change over time and WHY they act as they do. You only have to clear it out yourself, and you will see it when you watch the formula. But I still think this book requires understanding of principles of mathematics, at least it helps reading.

Too many books I have read after this (which have too had over four stars in review) does not give as deep and clear understanding of the option price behavior. They are more practical approach. This book gives you very good base for the oncoming readings too. You may not need to fully understand theory while trading but I think it is essential. It is like, you wouldn't go hunting birds and elks with shotgun because you want to shoot the elk with rifle. You should know how the tools work. If they do not work, at least you can figure it out why they didn't and avoid the same mistake in the future.

I like the text because it gives many aspects of the Black-Scholes model that I have not found elsewhere. One may feel that Black-Scholes is an "old" model, but it is the genesis of option pricing and understanding its intuition is the key to understanding more complex models. In addition, the text is very readable, but I think even more satisfying if the reader already has some options background.

"Basic Black-Scholes" is an excellent reference for those who need to get up to speed on Black-Scholes options pricing, quickly. This is not a textbook of option pricing theory, and doesn't go in great depth in many of the details. But unlike many textbooks, it does function well to rapidly and efficiently hone your intuition about option pricing, and gives a good high-level overview of many of the techniques used in this field. If you're less interested in the formal systems of stochastic calculus, and more interested in practicing pricing techniques, this would be a great reference.

This book seems best suited to those who are preparing for quant finance interviews, and would be very useful if paired with another of Crack's books, "Heard on the Street", or with a similar brainteaser preparation book such as "Quant Interview Questions & Answers" by Joshi et al. It could also be useful as a supplementary exercise book for those taking a course in derivatives pricing theory.

Crack's two books, Basic Black-Scholes and Heard On The Street,
are masterpieces of condensed ,focused instruction for those who need to know. There is also an atmosphere of scintillating competence projected on the reader. Some of the anecdotes in Heard On The Street are hilarious; add to this the requirement that you must keep your wits about you at all times when reading
these primers and overall you get a feeling of a happy learning experience. Remarkable.