<t>QuoteOriginally posted by: CrashedMintWell, thanks again. One more question: What's the 'telescope rule'? I googled it and couldn't really find anything, but I'd like to read some proof and I'm certain it should be online somewhere. Maybe under an alternative name?In continuous time telescope rul...

For expectation, exchange sum and expectation, use the fact that increments are normal, thus you'll get SUM var(Wtj-Wtj-1)=SUM(t_tj-t_tj-1)=[telescope rule]=t-0=t.How to deal with variance - I don't know.

<t>How are the market prices of options (e.g. European and American) determined? Do financial institutions directly use Black-Scholes, binomial or some other model? Are the models somehow modified? Which one is the most popular? How is hedging implemented in practice? Please, note, that I have suffi...