Learn about Greeks, American Options, and Volatility.
In this course, three methods are presented for pricing an option.
Then the assumption of constant volatility is challenged, due to the presence of the volatility smile, which is formally defined and shown to be empirically observed in all derivatives markets. Monte Carlo simulations are run to generate a distribution with kurtosis -- a mixture of normal distributions.
Finally, the Heston Model, which relaxes the assumption of constant volatility is presented.
Sample code is provided to run the Heston model. The corresponding implied volatilities are graphed and shown to replicate the volatility smile.