Skip to content

1. Pricing Models

Welcome to the pricing models section! This area covers the mathematical frameworks and computational methods used to price derivatives across different asset classes — from interest rates to equities, FX, and beyond.

1.1 Overview

Derivatives pricing combines elegant mathematics with practical implementation challenges. This section explores both theoretical foundations and real-world applications, drawing from authoritative texts including Brigo & Mercurio, Andersen & Piterbarg, and seminal research papers.

We cover:

  • Term structure models for interest rate derivatives
  • Volatility surface modeling for options pricing
  • Calibration techniques and numerical methods
  • Model validation and risk management

1.2 Topics Covered

  • Interest Rate Models — Short rate models (Vasicek, CIR, Hull-White) and affine bond pricing frameworks

  • Volatility Surface Models — Local volatility (Dupire) and stochastic volatility (SABR) models for capturing option smiles

Building confidence through rigorous validation