Black-Scholes Model

Knowledge Center

• About
• Home
• Dictionary
• Encyclopedia
• Question?
• Views

• Register
• Log in
• Help

• Change & Organization
• Communication & Skills
• Decision-making & Valuation
• Ethics & Responsibility
• Finance & Investing
• HRM
• Knowledge & Intangibles
• Leadership
• Marketing
• Program & Project
• Strategy
• Supply Chain & Quality

Description of Black-Scholes Model. Explanation.

Definition Black-Scholes Model. Description.

Black-Scholes Model is a pricing model of financial instruments, and in particular stocks and options, derived by Fischer Black and Myron Scholes in 1973. It is based on arbitrage arguments that uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the standard deviation (volatility) of the stock return.

The key assumptions of the model are:

• The price of the underlying instrument is a geometric Brownian motion, in particular with constant drift and volatility.

• It is possible to short sell the underlying stock.

• There are no arbitrage opportunities.

• Trading in the stock is continuous.

• There are no transaction costs or taxes.

• All securities are perfectly divisible (e.g. it is possible to buy 1/100th of a share).

• The risk-free interest rate is constant, and the same for all maturity dates.

Black-Scholes Model Forum Start a new topic   Explanation of Black-Scholes Option Valuation Equation The main equation for the Black-Scholes Option Val...           Comparing 2 Mutual Funds using Standard Deviation How can standard deviation be used to compare the ...

Black-Scholes Model Special Interest Group Special Interest Group

Best Practices - Black-Scholes Model Premium

Expert Tips - Black-Scholes Model Premium

Resources - Black-Scholes Model Premium Black-Scholes Option Valuation This presentation aims to briefly and clearly expl... Usage (application): Black-Scholes Model, Put Valuation, Call Valuation, Option Valuation     News about Black-scholes Model         Videos about Black-scholes Model         Presentations about Black-scholes Model         More about Black-scholes Model

Compare with: CAPM  |  APT  |  European-Style Option

Return to Management Hub: Decision-making & Valuation  |  Finance & Investing

More on Management  |  Return to Management Dictionary  | 

This ends our Black-Scholes Model summary and forum.