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The Complete Guide to Option Pricing Formulas Hardcover – September 1, 1997


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Product Details

  • Hardcover: 232 pages
  • Publisher: McGraw-Hill; 1 edition (September 1, 1997)
  • Language: English
  • ISBN-10: 0786312408
  • ISBN-13: 978-0786312405
  • Product Dimensions: 1 x 7.4 x 9.2 inches
  • Shipping Weight: 1.5 pounds
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (40 customer reviews)
  • Amazon Best Sellers Rank: #2,163,129 in Books (See Top 100 in Books)

Editorial Reviews

From the Back Cover

The first Sourcebook to Explain Every Important Option Pricing Formula. When pricing options in today's fast-action markets, experience and intuition are not longer enough. To protect your carefully planned positions, you need precise facts and tested information that has been proven time and again. The Complete Guide to Option Pricing Formulas is the first and only authoritative reference to contain every option pricing took you need, all in one handy volume: Black-Scholes, two asset binomial trees, implied trinomial trees, Vasiceck, exotics. Many important option pricing formulas are accompanied by computer code to assis in their use, understanding, and implementation. This invaluable, one-of-a-kind reference work gives you: a complete listing of key option formulas, all delivered in an easy-to-use dictionary format; Commentary that explains key points in the most important and useful formulas; Valuable software and ready-to-use programming code that enhances your understanding of option pricing models and their practical implementations; Practitioner-oriented formulas, and highlights of the latest option pricing research from major institutions worldwide; Pricing advances on commodity options like the Miltersen and Schwartz Model, exotic options such as extreme spread options and implied trinomial trees, and much more! Professionals who use options must have immediate access to reliable and complete option pricing formulas and information. The complete Guide to Option Pricing Formulas, an invaluable guide for both experienced users and those learning how to use the tools of valuation, is the first book to place all of the research and information you need at your fingertips. ABOUT THE AUTHOR Espen Gaarder Haug is a leading expert on derivatives theory and its practical implications. He has developed systems and tools for options and interest rate derivatives for the Chase Manhattan Bank Derivatives Research and Training Group (Europe), and also worked for several years in derivatives research and trading for Chemical Bank and Den Norske Bank. Haug is a greatly appreciated lecturer on derivatives in graduate finance programs and among practitioners. Further, he has published numerous articles on options in academic journals, including the Journal of Financial Engineering.

About the Author

Espen Gaarder Haug is a leading expert on derivatives theory and its practical implications. He has developed systems and tools for options and interest rate derivatives for the Chase Manhattan Bank Derivatives Research and Trading Group (Europe), and also worked for several years in derivatives research and trading for Chemical Bank and Dennorske Bank. Haug is a greatly appreciated lecturer on derivatives in graduate finance programs and among practitioners. Further, he has published numerous articles on options in academic journals, including the Journal of Financial Engineering.

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Customer Reviews

I will give this book 5+ stars forever!
Weiqin Xie
If you are an experienced programmer, you will easily improve the code, and if you are implementing the formulas in VBA for Excel, the code is quite adequate.
Andrew Katz
I have reviewed many of the formulas in several sections of this book and have found a number of mistakes.
Galileo Galilei

Most Helpful Customer Reviews

59 of 64 people found the following review helpful By Steve on July 27, 2004
Format: Hardcover Verified Purchase
This book is the "standard" for providing straightforward code demonstrating various options pricing techniques, and perhaps deservedly so -- after all, it really doesn't have too many competitors in that niche. However, even in the course of the fairly straightforward applications I've had for this book (mostly simple equity Cox-Ross and Black-Scholes modeling), I've been shocked by the number of blatant mathematical errors (in the formulas for rho with distinct carry and risk-free rates, for instance). Clearly, the author and editors didn't bother to spend much time verifying that the formulas they cite are actually correct. (I'm actually shocked to see a fellow reviewer praise the "proofreading" -- I'm guessing he or she never actually had to use any of the formulas in this book!)

Bottom line -- if you're looking for a handy, compact reference of option pricing formulas, this is probably what you'll end up with. But be careful. It is SO frustrating to spend hours trying to figure out where you made a mistake in implementing one of these models, only to learn that you DIDN'T make a mistake -- the mistake was in your source. Consider yourself warned...
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21 of 22 people found the following review helpful By A Customer on January 30, 1999
Format: Hardcover
Have you ever wished someone took all the significant option formulas of the last 25 years and packed them into one volume? Is your calculus rusty? How about putting the formulas into Visual Basic so they can be employed directly in Microsoft Excel spreadsheets or Access databases. This is the main appeal of Option Pricing Formulas, which fills a void in current option literature. As option players became more computer literate an anthology of coded option theory was clearly needed.
The book covers everything from the tried and true Black Scholes and Cox/ Rubenstein formulas to the more exotic worlds of barrier and currency translated options. Software is included with the Visual Basic code as well as preprogrammed Excel files. Think of it as a cookbook for the technically oriented option trader.
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50 of 59 people found the following review helpful By Galileo Galilei on December 2, 2003
Format: Hardcover
I have reviewed many of the formulas in several sections of this book and have found a number of mistakes. As a result, I can trust no formula from the book without reviewing the literature or some other source.
The author does not use consistent terminology throughout the book. Rather, the terminology of the original journal article is used for each pricing model. This makes referring to the articles convenient, but then you don't need the book if you're going to the source...
I have used few of the computer programs offered, but the ones that I have used have had terrible inefficiencies. For example, a bisectional iterative search was used, which is very simple to write but is also very inefficient. There are many other simple and more efficient alternatives.
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10 of 10 people found the following review helpful By Shashank Tripathi on July 23, 2001
Format: Hardcover
If you are reading this page, it means that you are interested in derivative securities. I am a person who is "average" on calculus (did it in univ 4 years back), have been a consultant until now since my graduation but wanted to move into i-banking...
I sulked at the thought of (if not dreaded) going back to calculus and all those math-heavy thingies, but among my searches I found this book. It sounded best because rather than a lot of historical and theoretical jazz alone, I wanted to see a compilation of the actual formulae. Believe me, JUST GET IT!!
1. This book gives me all of the above in one neat capsule form! All the introductory derivatives stuff i read sounded like "And derivates can be of the type options, futures etc". That 'etc' always bothered me because I wanted something which told me ALL types of derivatives. This book does it - at least MOST of it. It has BlackScholes, binomials, also has an excellent section on Monte Carlo.
2. This book also made me feel a lot more confident than the average book from my library - right from chapter 1, I did not feel that it has been a long time since I did derivatives and integration. Worth it.
3. Anyone who says that this is too techie for a normal person just does not get it. I am a very ordinary calculus guy, but this made sense ....you of course need to put your head to it..you cannot be watching Seinfeld and reading this book-- and remember, its structured more like a reference book with all the formulas and brief descriptions of why/how/where they are likely to be used. Excellent and efficient scope if you ask me!
4. As I said, if you are looking at this page then you are most likely interested in derivatives, and believe me my friend, just get this book.
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10 of 10 people found the following review helpful By Bachelier on January 11, 2007
Format: Hardcover
If you want to cook, buy the paperback edition of "The Joy of Cooking" (JoC) and low and behold, your cooking will improve. JoC is a recipe book, but as you work through it you learn principals for cooking that are widely applicable.

If you want to be in quantfin you need to buy The Complete Book of Option Pricing Formulas: it is the "Joy of Cooking" for options. As you work through the collection, the formulas, and look at the code (on a wonderful CDROM) low and behold you'll get better at all principals, concepts, and conceptions on how code works for option pricing formulas.

A word about errors in the previous edition: even critical editions of long-dead authors have errors in them, just look at the "errata" sheets from The Library of America critical editions.

For the first edition Espen Haug put his errata sheet immediately up on his website, and it also is widely available with a simple GOOGLE search (lots of people have copies on the various quant fin discussion boards). 10 seconds extra work versus whining away about how something isn't perfect? Oh, grow up. You rationally will be spending that much extra time on learning this code and digesting material in this book anyway.

Excellent in every way.
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