David Gershon & Alexander Lipton 
OPTIONS – 45 YEARS SINCE PUB BLACK-SCHOLES-MERTON MODEL [EPUB ebook] 
The Gershon Fintech Center Conference

This book contains contributions by the best-known and consequential researchers who, over several decades, shaped the field of financial engineering. It presents a comprehensive and unique perspective on the historical development and the current state of derivatives research. The book covers classical and modern approaches to option pricing, realized and implied volatilities, classical and rough stochastic processes, and contingent claims analysis in corporate finance. The book is invaluable for students, academic researchers, and practitioners working with financial derivatives, market regulation, trading, risk management, and corporate decision-making.

Contents:

• Using Option Pricing Information to Time Diversify Portfolio Returns (M S Scholes)


• How Good is Black–Scholes–Merton, Really? (P Wilmott)


• Probabilistic Interpretation of Black Implied Volatility (P Carr, L Wu, and Y Zhang)


• Probability-Free Models in Option Pricing: Statistically Indistinguishable Dynamics and Historical vs Implied Volatility (D Brigo)


• VIX and Derivatives (M Brenner)


• Multivariate Fractional Brownian Motion and Generalizations of SABR Model (M Musiela)


• Buy Rough, Sell Smooth (P Glasserman and P He)


• Volatility is Rough (J Gatheral, T Jaisson, and M Rosenbaum)


• Things We Think We Know (L C G Rogers)


• Cumulant Formulas for Implied Volatility (R Lee)


• Implied Volatility Asymptotics: Black–Scholes and Beyond (P Tankov)


• The Smile of Stochastic Volatility Models (J Guyon)


• A Neural Network Approach to Understanding Implied Volatility Movements (J Cao, J Chen, and J Hull)


• Modeling Volatility Risk in Equity Options Market: A Statistical Approach (D Dobi and M Avellaneda)


• A General Theory of Option Pricing (D Gershon)


• Old Problems, Classical Methods, New Solutions (A Lipton)


• 25 Years of Local Volatility and Beyond (B Dupire)


• Swap Rate à la Stock: Bermudan Swaptions Made Easy (D Gatarek and J Jabłecki)


• Thirty Years of Derivatives Market: Originality of the French Experience (N El Karoui)


• Option Prices in the Equity, Index and Commodity Markets: The ‘Message from Markets’ (E I Ronn)


• Options Markets in China: The New Frontier (H Li and Q Wang)


• Risk Exposure Valuation Using Measure Distortions: An Overview (D B Madan)


• Insider Trading (P Protter)


• Contingent Claims Analysis in Corporate Finance (M Crouhy, D Galai, and Z Wiener)

Readership: Academic researchers and practitioners working with financial derivatives and professionals involved in market regulation, trading and research on options, hedging and corporate decision making.

‘The Black–Scholes equation has quite a unique status in modern science: it is simultaneously extraordinarily important and woefully flawed. The present book, which musters an exceptional lineup of experts, reflects this duality. Some chapters celebrate the golden age, when mathematical finance explored all the nooks and crannies of the Black–Scholes world while too often turning a blind eye to its glaring inadequacies. Other contributions bite the bullet and present new and exciting modelling avenues, ever closer to the complexity ofreal markets.’ – Jean–Philippe Bouchaud Chairman and Head of Research, Capital Fund Management, and Member, Académie des Sciences, Paris

‘Gershon, Lipton, Rosenbaum, and Wiener have commemorated the landmark achievement of Black, Scholes, and Merton with an exceptional collection of works by most of the leading lights of the world of derivatives pricing and risk management. This volume conveys the continuing richness and vibrancy of the subject area. Anyone following developments in this field will want to have a copy.’ – Darrell Duffie The Adams Distinguished Professor of Management, and Professor of Finance, Stanford University

‘In the half century since the Black–Scholes–Merton theory was published, the world of finance has seen extraordinary advances boosting market activity by orders of magnitude. Despite unrealistic simplicities, the BSM model showed practitioners effective new ways of thinking, providing the key signposts needed to develop ever improving models and protocols for managing the risks and opportunities in the markets. With unparalleled gains in computing and data accessibility, we now stand at the threshold of a second great revolution in finance, and this book gathers the current research and thinking of the global leaders of financial engineering at this critical juncture, engineers who were brought together at Options: 45 Years After the Publication of the Black Scholes Merton Model. It is not known which combinations of neural nets, big data and machine intelligence, rough volatility and jump models, or synthetic hedging will lead us through these advances. But when we look back fifty years on, it will be clear that these works contain the key signposts for this next advance.’ – Patrick S Hagan Quantitative Trader, XBTQ Group, and Managing Director, Gorilla Science

‘This book is a remarkable accomplishment. It is a financial history masterpiece, written by those who made that history possible. The names of Scholes, Lipton, Hull, Dupire, Wilmott, Carr, Avellaneda, El Karoui, … are legendary in our industry, and an inspiration for generations to come. Any person with a remote interest in financial engineering must read this book, for what it says, and for who says it.’ – Marcos Lopez de Prado Global Head of Quantitative R&D, Abu Dhabi Investment Authority, and Professor of Practice, Cornell University

Key Features:

• The contributors to the book are some of the most influential researchers in financial engineering who shaped the field over the recent decades


• The reader can get first-hand information about the key milestones in financial engineering from their respective authors


• The book’s content is extensive and covers the most significant developments in valuation, hedging, and trading of financial derivatives and corporate finance


• The book explains modern approaches to volatility in detail and covers local, stochastic, local-stochastic, and rough volatility models


• The book covers in-depth specialized derivatives markets, including commodities, French, and Chinese markets