The two most popular models employed in determining the option values are the Black Scholes model and the stochastic volatility model. Though this model posed some problems in application, it nevertheless was one of the most vital methods in option valuation that served as foundation for other models.

These solutions are quite useful because they can be calculated fast. The former was brought about by Fischer Black and Hunfredo Scholes, thus the name of the model. When the valuation model has been chosen from the two types mentioned, more models and techniques may be used to implement them. The Stochastic volatility models, including the Heston model, are formed basically due to the volatility of the time and the price of the underlying spot. 6 Ways to Estimate the Value of Forex Options Forex options trading make use of various ways to effect the valuation of currency options. It may be solved in closed-form or via a more complex numerical methodology.

The analytic technique is the first one that can be used. The two came up with a solution for the theoretical price of options in Europe in 1970.

It is a mathematical model that produces closed-form solutions.