It introduction to option pricing theory is intended for students and researchers in statistics applied mathematics business or economics who have a background in measure theory and have completed probability theory at the intermediate level the work lends itself to self study as well as to a one semester course at the graduate level. Key takeaways option pricing theory is a probabilistic approach to assigning a value to an options contract the primary goal of option pricing theory is to calculate the probability that an option will be exercised or be increasing an options maturity or implied volatility will increase the . It introduction to option pricing theory is intended for students and researchers in statistics applied mathematics business or economics who have a background in measure theory and have completed probability theory at the intermediate level the work lends itself to self study as well as to a one semester course at the graduate level. The black scholes merton option pricing framework is the foundation of the structural model approach the default event is assumed to occur when the firms assets fall below the book value of the debt merton applied option pricing techniques to the valuation of corporate debt merton 1974 by extension the pricing of credit derivatives based on corporate debt may in some circumstances be treated as an option on debt which is therefore analogous to an option on an option model