"Option pricing: fundamentals and some recent developments" by Riccardo Brignone

Topic

Financial institutions rely on option pricing models to value complex derivatives and support high-frequency trading strategies. For these models to be useful in live trading and risk management, they must be both realistic and computationally efficient. This talk discusses three key challenges in financial engineering: model selection, calibration, and simulation. It reviews the main strands of literature on these topics, focusing on the trade-off between economic realism and mathematical tractability. Special attention will be given to the role of option market data in identifying stylized features of asset returns, evaluating model performance, and understanding financial phenomena. The talk will also address the practical challenge of model calibration and conclude with a discussion of simulation methods for option pricing models.