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Mar 20

Option pricing with excel

Posted by abiao at 22:14 | Code » VBA/Excel | Comments(0) | Reads(13711)
A nice paper on step-by-step option pricing with excel, VBA codes are included in the paper as well.

The authors first briefly review the principles of pricing by no arbitrage in a binomial tree, and show how this can be implemented in Excel; then move to continuous-time model - Black scholes pricing model; after a short discussion on the parameter estimation issues, they turn to two numerical methods for pricing, which are Monte Carlo simulation and Finite difference for Partial differential equation (PDE); at last, option hedging is introduced, advantages and disadvantages of spreadsheets in general and Excel in particular are analyzed shortly.

Download paper "Option pricing with the Excel" at http://www.math.ku.dk/~rolf/REV.excelpaper.pdf


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