Molecule has built-in option models that provide pricing (or compute implied volatilities) for options as part of the Trades model. These include:
- Black-76 (typically for European Options)
- Turnbull-Wakeman (typically for average-priced, or Asian, options)
- Bachelier (for spread options, or options where the underlying can go negative)
Molecule also has a Kirk's Approximation model available as part of the Assets model.
Molecule's option models are generally designed by referencing the original academic paper for each topic. We also consult Options, Futures, and Other Derivatives (Hull), internal experts, retained experts, and customers for assistance when necessary.
Testing follows our standard automated and manual testing processes, typically with real data. Additional testing is also done using Matlab (which generally refers to sources such as Hull and the original academic papers).