• It is not widely emphasized in the literature that derivatives are complex random quantities which should, by custom, be characterized by their probability density functions. • It is understood that Black-Scholes style of derivatives pricing represents an expected value, i.e. the...

•The first ever explicit formulation of the concept of an option's probability density functions has been introduced in our publication “Breakthrough in Understanding Derivatives and Option Based Hedging - Marginal and Joint Probability Density Functions of Vanilla Options - True...

Edgeworth binomial trees were applied to price contingent claims when the underlying return distribution is skewed and leptokurtic, but with the limitation of working only for a limited set of skewness and kurtosis values. Recently, Johnson binomial trees were introduced to accommodate any...