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The Complete Guide to Option Pricing Formulas
 
 
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The Complete Guide to Option Pricing Formulas [Hardcover]

Espen Gaarder Haug (Author)
4.2 out of 5 stars  See all reviews (34 customer reviews)

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Product Description

Long-established as a definitive resource by Wall Street professionals, The Complete Guide to Option Pricing Formulas has been revised and updated to reflect the realities of today's options markets. The Second Edition contains a complete listing of virtually every pricing formula_ all presented in an easy-to-use dictionary format, with expert author commentary and ready-to-use programming code.

The Second Edition of this classic guide now includes more than 60 new option models and formulas…extensive tables providing an overview of all formulas…new examples and applications…and an updated CD containing all pricing formulas, with VBA code and ready-to-use Excel spreadsheets.

The volume also features several new chapters covering such things as: option sensitivities, discrete dividend, commodity options, and two chapters on numerical methods covering trees, finite difference and Monte Carlo Simulation.

The new edition of The Complete Guide to Option Pricing Formulas offers quick access to:

  • Options Pricing Overview
  • Black-Scholes-Merton
  • Black-Scholes-Merton Greeks
  • Analytical Formulas for American Options
  • Exotic Options Single Asset
  • Exotic Options on Two Assets
  • Black-Scholes-Merton Adjustments and Alternatives
  • Trees and Finite Difference Methods
  • Monte Carlo Simulation
  • Options on Stocks that Pay Discrete Dividends
  • Commodity and Energy Options
  • Interest Rate Derivatives
  • Volatility and Correlation
  • Distributions
  • Some Useful Formulas: Interpolation, Interest Rates, and Risk-Reward Measures

This all-in-one options pricing guide contains a numerical example or a table with values for each option pricing formula. The book also includes a helpful glossary of notations, as well as an extensive bibliography of related books and articles.

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. --This text refers to an out of print or unavailable edition of this title.

Product Details

  • Hardcover: 492 pages
  • Publisher: McGraw-Hill; 2 edition (December 18, 2006)
  • Language: English
  • ISBN-10: 0071389970
  • ISBN-13: 978-0071389976
  • Product Dimensions: 9.3 x 7.9 x 1.9 inches
  • Shipping Weight: 2.7 pounds (View shipping rates and policies)
  • Average Customer Review: 4.2 out of 5 stars  See all reviews (34 customer reviews)
  • Amazon Bestsellers Rank: #133,252 in Books (See Top 100 in Books)
    #48 in  Books > Business & Investing > Investing > Options

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The Complete Guide to Option Pricing Formulas
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Customer Reviews

34 Reviews
5 star:
 (24)
4 star:
 (4)
3 star:    (0)
2 star:
 (2)
1 star:
 (4)
 
 
 
 
 
Average Customer Review
4.2 out of 5 stars (34 customer reviews)
 
 
 
 
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Most Helpful Customer Reviews

 
50 of 52 people found the following review helpful:
2.0 out of 5 stars Nice idea, but MANY errors, July 27, 2004
By Steve (Chicago, IL United States) - See all my reviews
Amazon Verified Purchase(What's this?)
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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43 of 48 people found the following review helpful:
1.0 out of 5 stars Numerous technical mistakes, December 2, 2003
By Galileo Galilei (Frostbite Falls, MN USA) - See all my reviews
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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17 of 18 people found the following review helpful:
5.0 out of 5 stars A cookbook for the quantitative options trader, January 30, 1999
By A Customer
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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Most Recent Customer Reviews

4.0 out of 5 stars Book Review from the Aleph Blog
his is not my ordinary book review. These are good books that will only appeal to a small fraction of my readers, because few will have need for the knowledge. Read more
Published 7 months ago by David Merkel

5.0 out of 5 stars If you are a developer, get this book!
I have been implementing various options calculators in many programming languages on several operating systems for over 25 years. Read more
Published 8 months ago by Andrew Katz

5.0 out of 5 stars Most comprehensive reference I have seen
This could be the best book you could find for existing closed form option pricing formulas, if you are not concerned with their derivations. Read more
Published 16 months ago by R. Yu

5.0 out of 5 stars A must-read that is quickly becoming a classic
I have to agree with the majority of the reviewers: this is a great book, period. The amount of material is simply staggering, and the author's nickname of the "Collector" is... Read more
Published 20 months ago by Fabrice Rouah

5.0 out of 5 stars A must-have for all quantitative-finance students and practitioners
Simply put, Haug's book is a must-have for all students and practitioners in quantitative finance. The book has grown to over 500 pages in its second edition and contains a... Read more
Published 20 months ago by LJ Haasbroek

4.0 out of 5 stars Very nice book
This is a great reference book to have, spanning a wide spectrum of topics.

It begins covering anaylitical solutions for a variety of common equity/FX/commodities... Read more
Published 22 months ago by Federico Han

4.0 out of 5 stars The Ultimate Book on Option Prices
In this book the author, Haug, shares with us his lifetime collection of option formulae.

The book can be used as a reference book or read from cover to cover. Read more
Published 22 months ago by G. Burnett

5.0 out of 5 stars Every desk should have a copy: by a practitioner for practitioners
If you want to cook, buy the paperback edition of "The Joy of Cooking" (JoC) and low and behold, your cooking will improve. Read more
Published on January 11, 2007 by Bachelier

5.0 out of 5 stars Excellent Book
A very exhaustive list of the formula for the most used option.
A must for all Option trader. The codes are very helpfull also.

Published on May 12, 2006 by Mikhael Farouz

5.0 out of 5 stars A fundamental source in a pricing area
It's not expensive and almost complete. Don't show the Greeks' formulas, which is very important for practitioners.
Published on September 21, 2005 by Alvaro A. Mendonca

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