The Valuation of Derivatives: A Survey

This note contains a survey of the financial literature on derivatives, starting from Bachelier’s con-tribution to option pricing theory. After a brief analysis of forward, futures, options and repos (swaps have not been considered), we concentrated on options whose underlying assets are stocks or bonds. After distinguishing between standard and exotic options, we described the hypotheses made and the solutions obtained in pricing these financial instruments. The more complex topic of bond deriva-tives was then considered. We made a distinction between bond price and interest rate models, be-tween continuous and discrete time models, between equilibrium and arbitrage models, between one-factor and multi-factor models.