Back to Quantitative trading

Module 05 · Derivatives and risk

Derivatives pricing and the Greeks

European and American option pricing, closed-form Black-Scholes-Merton equations, analytical Greeks, and binomial trees.

4 lessons · 3 graded exercises·3 hours·intermediate·Prerequisite: Statistical arbitrage and factor models

Options and put-call parity

Non-linear derivative payoffs, no-arbitrage bounds, and the theoretical foundation of put-call parity.

The Black-Scholes-Merton model

25 min · exercise

Price European call and put options using the continuous Black-Scholes-Merton closed-form formula.

Analytical Greeks and sensitivity risk

25 min · exercise

Compute option price sensitivities (Delta, Gamma, Vega, Theta, Rho) to manage non-linear portfolio exposures.

Binomial trees and American options

25 min · exercise

Price American and European options with early exercise using the Cox-Ross-Rubinstein binomial lattice.