Black-Scholes Model

Knowledge Center





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.


Special Interest Group - Black-Scholes Model


Special Interest Group (43 members)


Forum - Black-Scholes Model  

Discussions about Black-Scholes Model.


  Comparing 2 Mutual Funds using Standard Deviation
How can standard deviation be used to compare the rate of return on two mutual funds? (...)
 
 
 
 
Hot Explanation of Black-Scholes Option Valuation Equation
The main equation for the Black-Scholes Option Valuation is as follows: C = S.N(d1. - X.e-RT. N(d2. (12) where: C is (...)
 
 
 
 

Best Practices - Black-Scholes Model

Here you find the most valuable discussions from the past.



Expert Tips - Black-Scholes Model

Here you will find advices by experts.



Resources - Black-Scholes Model

Here you find powerpoint presentations, micro-learning videos and further information sources.


Black-Scholes Option Valuation

Black-Scholes Model, Put Valuation, Call Valuation, Option Valuation (...)
 

Compare with: CAPM  |  APT  |  European-Style Option

Special Interest Group Leader

You here? Sign up for free


 
 

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.



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2019 12manage - The Executive Fast Track. V15.2 - Last updated: 15-12-2019. All names of their owners.