APPLICATION OF THEORETICAL OPTIONS PRICING TO ALGORITHMIC TRADING STRATEGIES

Toropov Alexander V, Dmitry V. Ivanov, Shpolyanskiy Yuri Alexandrovich

2013 , VOLUME 13, NUMBER 2 ( MARCH-APRIL )

ISSN 2226-1494 (print), ISSN 2500-0373 (online)

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Nikiforov
Vladimir O.
D.Sc., Prof.

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APPLICATION OF THEORETICAL OPTIONS PRICING TO ALGORITHMIC TRADING STRATEGIES

A. V. Toropov, D. V. Ivanov, Y. A. Shpolyanskiy

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Abstract

We implemented analytical and numerical models of theoretical pricing for European, American, Asian and barrier options. An original computational approach is applied to the case of multiple payments of discrete dividends. The models are in the ground of the developed automatic strategies for algorithmic trading including those for market-making, hedging, risk management, and trading of combinations. These strategies are used successfully by large banks and trading firms.

Keywords: theoretical pricing, option, trading strategy, algorithmic trading

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