Index
A
Abramowitz, Milton, 178
American boundary (free boundary), 97–98
American option, 158
American-style exercise, 117
American-style option, 4
Analytic bond call option, 74–75
Analytic formula. See European option
Analytic zero-coupon bond valuation, 73–74
Arbitrage freedom, 77
Arbitrage-free value, 113
ATM. See At-the-money
At-the-market CDS, 111
At-the-money (ATM) index options, 122
Average annualized volatility, 41
B
Backward Kolmogorov equation, 43–46
writing, 153
Barone-Adesi, G., 178
Black-Scholes call option formula, Fourier transform, 84
Black-Scholes derivation, 49–50
application. See Currency options
discussion, 81
financial interpretation, 48
Green’s function, solving, 167–168
index borrow inputs, 122
regaining, 61
relationship. See Risk-neutral pricing;
Risk premium
alternative, 52
understanding, 51
usage, 48. See also Martingale;
Options
values, 99
volatility inputs, 121
von Neumann stability mode, expansion. See Discretized Black-Scholes equation
Black-Scholes formula, 5
assumptions, 6
modifications, 7
rewriting, 60
Black-Scholes option pricing formulae, 51–52
Black-Scholes put option formula, Fourier transform, 158
Bond call option. See Analytic bond call option
Bond price
changes, 71
inputs, 73
Bonds
correlated-default survival ...
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