Derivatives - Options and Their Applications

Derivatives have become hugely important in finance in the last thirty years and this attention is on the part of business school students and practitioners themselves. Derivatives are traded on many exchanges throughout the world. The main derivatives are option, forward, future, and swap. The learning process is usually difficult in any new subject, this book is written in such a way so that the reader will easily understand the concept of derivatives. The book presents the concepts related to derivatives in a simple and accessible manner. The book begins by providing an introduction to the derivatives in Chapter 1. Chapter 2 deals with the Binomial option pricing model and its terminologies. Chapter 3 deals with the Black Scholes model and how to derive the partial differential equation of the Black Scholes model. Chapter 4 deals with the monte carlo simulation with Matlab codes and Chapter 5 deals with the application of the Black Sholes Model to find the probability default. A unique feature of the book is that the examples are solved using both Binomial Model and the Black Scholes model and also practice problems are also given at the end of the book.