The Complete Guide to Option Pricing Formulas

by Espen Gaarder Haug

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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.

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All Customer Reviews
Average Customer Review: 4 out of 5 stars

8 of 8 people found the following review helpful:

5 out of 5 stars

Every desk should have a copy: by a practitioner for practitioners, 2007-01-11
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.

4 of 7 people found the following review helpful:

5 out of 5 stars

Excellent Book, 2006-05-12
A very exhaustive list of the formula for the most used option.
A must for all Option trader. The codes are very helpfull also.

4 of 6 people found the following review helpful:

5 out of 5 stars

A fundamental source in a pricing area, 2005-09-22
It's not expensive and almost complete. Don't show the Greeks' formulas, which is very important for practitioners.

6 of 7 people found the following review helpful:

5 out of 5 stars

Very helpful book, 2005-08-11
I have been using this book for many years now and it is absolutely fantastic. This book is useful for practical users as a first step towards option pricing. This book is not intented for critical analysis and derivation of the formulas (there are a zillion research papers for that). I like the approach of the book. It keeps it simple - input parameters, formula, result. It has many examples which helps me to calibrate my results.

Bottom line - if you have a PhD and strong math background read the source literature and research papers. For the rest of us this is "the" book.

41 of 43 people found the following review helpful:

2 out of 5 stars

Nice idea, but MANY errors, 2004-07-28
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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