Black Scholes Model

The Black-Scholes model, is one of the most important concepts in modern financial option theory. Developed in 1973, it is regarded as on of the best ways to value European styles options from a risk-neutral, no arbitrage pricing approach.

Delta Hedging using Black-Scholes

Full worked example of the impact of delta hedging european options. Implied Volatility Create functions to appply to pandas dataframes to calculate specific adjustments to be made during delta hedging. Create Dynamic Hedging results dataframe to append rows to. Create simulations of underlying stock prices using Geometric Brownian Motion (GBM) over time. Build up delta hedging dataframe with specific factors:  delta total delta positions  …

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Historical Volatility Cones

To truly be an effective options trader it’s essential that you understand volatility. After all, having a sense of whether an option is “cheap” or “expensive” should help in your option strategy selection. For the most part, traders focus on two types of volatility, implied volatility and historical volatility. This article concentrates on the latter.