The Black-Scholes Model: For Proprietary Trading

This course is organized into three stages; beginners, intermediate, and professional.

The beginner’s level (Section 1), using a simple binomial model, explains why you can make money using what you have learned about the Black-Scholes theory in a basic finance course. This is sufficient to use for a personal winning experience.

At the intermediate level (Sections 2-3), we review the Black-Scholes model in an alternative way as a preparation for more advanced applications. We give closed-form solutions for futures and European options in Section 3. Especially futures formula is general and can be used even when the underlying has jumps in the valuation process.

At the professional level (Section 4), it is not possible to lay down the entire propriety system design in a single lecture. We point in the direction of the core design.