This chapter deals with two of the benchmark models for options pricing, the Black‐Scholes‐ Merton (BSM) continuous time model and the Cox‐Ross‐Rubinstein (CRR) discrete time binomial model. It presents the BSM model and some associated aspects of the pricing theory. Then, it analyzes how option prices and other quantities of interest react to changes in the model parameters. The major topic is the so‐called Greeks, i.e. the delta and theta of an option, for example. In practice, option traders try to hedge one or several of the risks represented by the Greeks. The chapter focuses on fundamental aspects of the binomial option pricing approach pioneered by CRR that allow an implementation in Python. A detailed treatment of the model is found in Pliska. The CRR model can handle options with early exercise features, i.e. American or Bermudan options, as well as options with arbitrary payoffs at time.