Options are the simplest non-trivial financial derivatives around.
They are part of the curriculum of every university course on Finance for a good reason: They are everywhere!
They are traded on regulated exchanges around the world, change hands over the counter between … consenting adults, enhance or "infect" all sorts of contracts as "embedded options", constitute the main ingredient of insurance policies. In their pure form, their annual volume on U.S. Equity Option exchanges alone exceeds 4 billion contracts!
This is the first of a series of articles that will show you how to compute the fair value of options within Excel without using expensive third party software.
Read the rest of this article at Beyond Black Scholes: European Options without Dividends