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The Complete Guide to Option Pricing Formulas (Professional Finance & Investment) Hardcover – January 8, 2007
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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.
About the Author
Espen Gaarder Haug, has more than 15 years of experience in derivatives trading and research. He has worked as a proprietary option trader at J.P. Morgan Chase in New York, and as an option trader for the hedge funds Amaranth Advisors and Paloma Partners. Dr. Haug has published extensively in journals such as Quantitative Finance, International Journal of Theoretical and Applied Finance, and Wilmott Magazine. He is also a popular lecturer on option pricing, hedging, and risk management and an Adjunct Associate Professor at Norwegian University of Science and Technology.
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Top Customer Reviews
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...
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.
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.
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. It is worth EACH PENNY regardless of what other books you may have!
If you are really keen, I would also suggest reading this in conjunction with "Options, futures..." by John Hull (Prentice Hall). And if you are really really keen, take a look at this v. informative website:
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.
Most Recent Customer Reviews
Good demonstration of the formulae, without falling into excessive theorem demonstrations
The CD has a complete set of...Read more