In this chapter, we met the challenge of discussing one of the most beautiful and most difficult parts of financial math: derivative pricing. We learned in theory and in practice about generalizations of the Black-Scholes model for related problems. We learned how to use R and the Black-Scholes formula for currency options. We saw how easy it is to implement our own code for the Margrabe formula, which is an extension of the Black-Scholes model. We used this formula to price stock options, currency options, and exchange options. Finally, we discussed quanto options and realized that quantos can also be priced with the Margrabe formula.

If you found this chapter exciting, you will be enthusiastic about the next one, which is about a related topic, that is, interest rate derivatives.