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This book demonstrates the inadequacy of simple arbitrage-free strategy in pricing options and discusses the intricacies of the two best known option pricing models—Bionomial Model and Black–Scholes Model. It covers- Variables influencing option value; Binomial Model for European and American options; Black-Scholes Model: stochastic processes, Ito’s lemma and Black- Scholes formulae; the ‘Greeks’— Delta, Gamma, Vega, Theta, Rho—in the Black-Scholes formula.
