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ANNIVERSARY ARTICLE: Option Pricing: Valuation Models and Applications

Graduate School of Business, Columbia University, 3022 Broadway, New York, New York 10027-6902
School of Management, Boston University, 595 Commonwealth Avenue, Boston, Massachusetts 02215
mnb2{at}columbia.edu
detemple{at}bu.edu

This paper surveys the literature on option pricing from its origins to the present. An extensive review of valuation methods for European- and American-style claims is provided. Applications to complex securities and numerical methods are surveyed. Emphasis is placed on recent trends and developments in methodology and modeling.

Key Words: option pricing; American options; risk-neutral valuation; jump and stochastic volatility models