The conceptual frame work behind a trading model.

[John Tila]

A model is a framework we can use to compare options of different maturities, underlying, and strikes. We do not insist that it is in any sense true or even a particularly accurate reflection of the real world. As options are highly leveraged, nonlinear, time-dependent bets on the underlying their prices change quickly. The major goal of a pricing model is to translate these prices into a more slowly moving system.