Information on the theory and application of the Black Scholes option pricing model.
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To understand the Black Scholes Option Pricing Model, it is imperative to understand what the Black Scholes formula and what an option-pricing model is. The Black Scholes model is a model of financial markets based on a mathematical formula. The formula contains instruments of investments called "derivatives," and from this model, we can extrapolate the Black Scholes formula, a Nobel Prize winning formula. We also get the Black Scholes equation from this formula. The Black Scholes formula determines the price of "European-style" stock options and doing so eventually led to the creation of the Chicago Board Options Exchange.
Created by Myron Scholes and Fischer Black in a paper ... more
