/lect_options_and_mm

Options and Market Making presentation material

Primary LanguageJupyter Notebook

Options and Market Making (Lecture)

Try on hosted environments

Gitpod Binder

Local Use

  1. Install Graphviz.
  2. Run . ./install/install.sh. It will basically install poetry, and setup the environment.

Local Run

  • poetry run jupyter notebook

Content Description

Options Pricing and Market Making presentation material.

Sections are covered by jupyter notebooks.

Intuition of pricing

  • Averaging, expectation, pricing and replication
  • Basic example of binomial 1-step model pricing
  • 01_intuition_of_pricing.ipynb

No Model Pricing

  • Abscence of Arbitrage implication in pricing
  • No model dependent
  • Insight to pricing/probability duality
  • 02_no_model_pricing.ipynb

Binomial Model

  • More detailed coverage of binomial model, 1-step and multistep
  • 03_binomial_model.ipynb

Continuous Model

  • Introduction to continuous model
  • Definition of stochastic integration
  • Itô Lemma
  • Basic exemples of option pricing using FTAP
  • 04_continuous_model.ipynb

Option hedging and Market Making

  • Concrete overview of Call option pricing and greeks
  • Replication portfolio example, and link to pricing
  • Real life (not simulated) call replication
  • Explanation of tracking error
  • Link to market making
  • 05_call_option_mm.ipynb

About Jupyter & Diaporama

Update a notebook to Diaporame mode

  1. Go to raw edition mode for notebook
  2. Go to the metadata attribute (at the bottom)
  3. It should contains :

    1. "celltoolbar": "Diaporama"

    2. "hide_input": false

Access slide options for cells

  • Go to : edit / cell / slideshow