Chapter 15 of Wilmott’s book introduces the binomial model, and honestly it might be the single most important chapter for building intuition about how option pricing actually works. Forget stochastic calculus for a moment. This model uses nothing more than basic arithmetic, and yet it arrives at exactly the same answers as Black-Scholes.
Wilmott calls Chapter 5 “without doubt, the most important chapter in the book.” He is not exaggerating. Everything before this was setup. Everything after this builds on what happens here. The Black-Scholes equation was first written down in 1969, the derivation was published in 1973, and finance has never been the same since.
I’m about to do something a bit ambitious. I’m going to retell the entire “Paul Wilmott on Quantitative Finance” - one of the biggest, most comprehensive textbooks on quantitative finance ever written. And I’m going to do it in plain English.