This chapter used derivative pricing only in terms of implementation in R, and various packages such as foptions, termstrc, CreditMetrics, credule, GUIDE, and fExoticOptions to price options, bonds, credit spreads, credit default swaps, and interest rate derivatives, and different types of exotic options were used. Derivative pricing is crucial in derivative trading and it is very important to learn it.
This chapter also covered the Black-Scholes and Cox-Ross-Rubinstein methods, along with Greeks and implied volatility for options. It also explained bond price and yield curves. It also used functions which explain how credit spread, credit default swaps, and interest rate derivatives are priced. Toward the end, it covered various types of exotic options. It used data given in relevant packages and implemented functions.
