Risk
Option Valuation
Binomial Trees, Risk-Neutral Pricing, and the Black-Scholes-Merton Model
3 CPD credits on completion
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Certificate on completion
Downloadable resources
Self-paced learning
About This Course
Course Information
This course covers a valuation method called binomial trees and the famous Black-Scholes-Merton model
Certificate on Completion
This course is made up of videos, questions and additional reading materials, and accounts for 3 units of CPD. One unit is the equivalent of one hour of learning. A certificate will be issued once you have completed all 3 units.
Course Sections
This course is made up of the following sections:
- Binominal Trees (Video + Quiz)
- The Black-Scholes-Merton Mode (Video + Quiz)
- Course Completion Survey (Quiz)
- Additional reading materials
What You Will Learn
- Calculate option values using one-step and two-step binomial tree models with up-move and down-move factors derived from volatility
- Explain risk-neutral valuation and how probability-weighted payoffs are discounted at the risk-free rate to price derivatives
- Apply put-call parity to derive put option values from known call option prices
- Describe the assumptions of the Black-Scholes-Merton model, including lognormal stock price distribution and normally distributed returns
- Calculate the mean and standard deviation of stock price distributions and continuously compounded rates of return
- Distinguish between European and American option pricing and the conditions under which early exercise may be optimal
Who This Course Is For
- Risk professionals and derivatives analysts who need to understand option pricing models in depth
- Finance professionals preparing for FRM or CFA exams who need to work through binomial and BSM calculations
- Quantitative analysts seeking a structured refresher on the mathematical foundations of option valuation
Prerequisites
- Working knowledge of options (calls, puts, strike prices, expiration) and basic derivatives terminology
- Comfort with mathematical notation, logarithms, and exponential functions
Frequently Asked Questions
Course Details
CPD Credits3
CertificateYes
Pricing
Pricing
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