Table Of ContentThe Black–Scholes equation has quite a unique status in modern
science: it is simultaneously extraordinarily important and woefully
flawed. The present book, which musters an exceptional lineup of
experts,reflects this duality. Some chapterscelebrate the golden age,
when mathematical finance explored all the nooks and crannies of
the Black–Scholes world while too often turning a blind eye to its
glaring inadequacies. Other contributions bite the bullet and present
new and exciting modelling avenues, ever closer to the complexity of
real markets.
Jean-Philippe Bouchaud
Chairman and Head of Research, Capital Fund Management, and
Member, Acad´emie des Sciences, Paris
Gershon, Lipton, Rosenbaum, and Wiener have commemorated the
m landmark achievement of Black, Scholes, and Merton with an excep-
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ntifi of derivatives pricingandrisk management. Thisvolume conveys the
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boosting market activity by orders of magnitude. Despite unreal-
istic simplicities, the BSM model showed practitioners effective new
ways of thinking, providing the key signposts needed to develop ever
improving models and protocols for managing the risks and oppor-
tunities in the markets. With unparalleled gains in computing and
data accessibility, we now stand at the threshold of a second great
revolution in finance, and this book gathers the current research and
thinking of the global leaders of financial engineering at this critical
juncture, engineers who were brought together at Options: 45 Years
After the Publication of the Black Scholes Merton Model. It is not
knownwhichcombinationsofneuralnets,bigdataandmachineintel-
ligence, rough volatility and jump models, or synthetic hedging will
lead us through these advances. But when we look back fifty years
on, it will beclear that these works contain the key signposts for this
next advance.
Patrick S. Hagan
Quantitative Trader, XBTQ Group, and
Managing Director, Gorilla Science
This book is a remarkable accomplishment. It is a financial history
masterpiece, written by those who made that history possible. The
names of Scholes, Lipton, Hull, Dupire, Wilmott, Carr, Avellaneda,
El Karoui, ... are legendary in our industry, and an inspiration for
generations to come. Any person with a remote interest in financial
engineeringmustreadthisbook,forwhatitsays,andforwhosaysit.
Marcos Lopez de Prado
m Global Head of Quantitative R&D, Abu Dhabi Investment Authority, and
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World Scientific Lecture Notes in Finance
ISSN: 2424-9939
Series Editors: Professor Alexander Lipton and Professor Itzhak Venezia
This series provides high quality lecture note-type texts in all areas of finance,
for courses at all levels: undergraduate, MBA and PhD. These accessible and
affordable lecture notes are better aligned with today’s classrooms and are written
by expert professors in their field with extensive teaching experience. Students will
find these books less formal, less expensive and also more enjoyable than many
textbooks. Instructors will find all the material that they need, thus significantly
reducing their class preparation time. Authors can prepare their volumes with ease,
as they would be based on already existing, and actively used, lecture notes. With
these features, this book series will make a significant contribution to improving
the teaching of finance worldwide.
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ntifi Published:
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worl Model: The Gershon Fintech Center Conference
w. edited by David Gershon (The Hebrew University of Jerusalem, Israel),
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m Alexander Lipton (Abu Dhabi Investment Authority, UAE &
ed fro TMhaet hHieeub rRewos eUnnbiavuemrs i(tÉy coofl eJe Pruoslyatleecmh,n Iisqruaee,l )F, rance) and
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D Vol. 5 Lecture Notes in Investment: Investment Fundamentals
by Eliezer Prisman (York University, Canada)
Vol. 4 Lecture Notes in Market Microstructure and Trading
by Peter Joakim Westerholm (The University of Sydney, Australia)
Vol. 3 Lecture Notes in Behavioral Finance
by Itzhak Venezia (Tel Aviv-Yaffo Academic College, Israel &
The Hebrew University of Jerusalem, Israel)
Vol. 2 Lecture Notes in Fixed Income Fundamentals
by Eliezer Z. Prisman (York University, Canada)
Vol. 1 Lecture Notes in Introduction to Corporate Finance
by Ivan E. Brick (Rutgers Business School at Newark and
New Brunswick, USA)
More information on this series can also be found at https://www.worldscientific.com/series/wslnf
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World Scientific
Published by
World Scientific Publishing Co. Pte. Ltd.
5 Toh Tuck Link, Singapore 596224
USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601
UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE
Library of Congress Cataloging-in-Publication Data
Names: Gershon, David, editor. | Lipton, Alexander, editor. |
Rosenbaum, Mathieu, editor. | Wiener, Zvi, editor.
Title: Options — 45 years since the publication of the Black-Scholes-Merton model :
the Gershon Fintech Center conference / edited by David Gershon, The Hebrew University of
Jerusalem, Israel, Alexander Lipton, Abu Dhabi Investment Authority, UAE &
The Hebrew University of Jerusalem, Israel, Mathieu Rosenbaum, École Polytechnique, France,
Zvi Wiener, The Hebrew University of Jerusalem, Israel.
Other titles: Options — fourty five years since the publication of the Black-Scholes-Merton model
Description: New Jersey : World Scientific, 2023. | Series: World scientific lecture notes in finance,
2424-9939 ; volume 6 | Includes bibliographical references and index.
m Identifiers: LCCN 2022020945 | ISBN 9789811255861 (hardcover) |
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c.c ISBN 9789811259142 (ebook) | ISBN 9789811259159 (ebook other)
ntifi Subjects: LCSH: Options (Finance) | Finance--Data processing. | Corporations--Finance.
e Classification: LCC HG6024.A3 O647 2023 | DDC 332.64/53--dc23/eng/20220716
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m A catalogue record for this book is available from the British Library.
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nl Copyright © 2023 by World Scientific Publishing Co. Pte. Ltd.
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D All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means,
electronic or mechanical, including photocopying, recording or any information storage and retrieval
system now known or to be invented, without written permission from the publisher.
For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance
Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA. In this case permission to photocopy
is not required from the publisher.
For any available supplementary material, please visit
https://www.worldscientific.com/worldscibooks/10.1142/12822#t=suppl
Desk Editors: Soundararajan Raghuraman/Pui Yee Lum
Typeset by Stallion Press
Email: [email protected]
Printed in Singapore
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TTThhhiiisss pppaaagggeee iiinnnttteeennntttiiiooonnnaaallllllyyy llleeefffttt bbblllaaannnkkk
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(cid:2)c 2023 World Scientific Publishing Company
https://doi.org/10.1142/9789811259142 fmatter
Preface
On December 4–5, 2019, the Gershon Fintech Center organized
the international conference entitled Options: 45 Years After the
Publication of the Black Scholes Merton Model,hostedattheHebrew
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o University of Jerusalem. It celebrated the original Black–Scholes–
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entific. Mpreicritnognfsoinrmceultahpeunb.liIsnheaddidnit1i9o7n3taondketryenmoteensdopursespernotgerdessbyinMopytrioonn
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ds Scholes and Robert Merton, some of the most distinguished and
worl respected financial engineering experts delivered 22 lectures.
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w We feel that Options: 45 Years After the Publication of the
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m Black Scholes Merton Model was a significant event that deserves
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de Unfortunately, COVID-19 prevented its timely publication, but, as
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nl they say, “better late than never”. In addition to Scholes’ keynote
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trum of options pricing and hedging topics. As a result, we expect
that the readers will benefit from deep and timely insights into this
exciting and vital field.
ix
