you do mean R. Merton, don't you? You know, JP Morgan has been dead for a while, way before the era of correlation trading
returning back to the topic - it's worth looking at SABR: http://www.princeton.edu/~sircar/sabrall.pdf it is a bit tricky to implement, but it's worth it.
Question, I use B&S all the time for my trading, but Cybertrader also has available Barone-Adesi-Whaley and Cox-Ross-Rubinstein. models. Can someone tell me how they differ, or has anyone heard of the other two? p.s this book is a good read:, it's not technical but more a light hearted look at the life of a Quant, with a some technical info thrown in. http://www.amazon.com/exec/obidos/A...5/sr=2-1/ref=pd_bbs_b_2_1/002-8653382-8681626
Whaley is quadratic model with an adjustment for american-exercise conventions. -- Black Scholes is a closed form solution; CRR is a "brute force" open form binomial tree which follows the movements of the spot under GBM and outputs pricing thru backward induction. Very widely used and accurate for Amer. options provided sufficient iterations are chosen.
Yes sorry lol By the way I have read somewhere that JP Morgan actually died in the Titanic when it sank, is there any truth in that ?
There's a paper on CCR model here: http://www.business.uiuc.edu/gpennacc/f400n10.pdf#search='CoxRossRubinstein' The paper should be explicit enough to help you model it in Excel.