Black Scholes Model

(redirected from Black Scholes)
Also found in: Acronyms.

Black Scholes Model

A model for mathematically pricing options. The model takes into account the strike price, the time until the expiration date, the price of the underlying asset, and the standard deviation of the underlying asset's return. The model assumes that the option can only be exercised on the expiration date, that it will provide a risk-free return, and that the volatility of the underlying asset will remain constant throughout the life of the contract. The calculation is slightly different for calls and puts. See also: Option Adjusted Spread, Option Pricing Curve.
References in periodicals archive ?
The data shows that the Black Scholes model does not account for the large volume of exits that result in less than the amount of the capital invested.
The table contains pricing errors for the Black Scholes and Student models.
These include the use of the Black Scholes option pricing model to value stock option commitments made to employees.
com Parish & Company supplements the Black Scholes disclosure with a more traditional accounting approach using recent SEC 10K filings that includes restating earnings for the period 1995-1998 at both Microsoft and Cisco Systems to quantify this impact.
Group expenses for the period included increased salary and wages costs associated with the employment of additional technical staff in the company's US and Australian offices, the valuation of options granted and issued using the Black Scholes method, costs associated with capital raising activities, and costs associated with testing and demonstrating Metal Storm technology in Australia and the US.
Promising to put an end to B2B hype, the conference now includes Nobel Laureate and co-originator of the Black Scholes pricing model, Myron Scholes, and business-to-business visionary Ray Lane, general partner, Kleiner Perkins Caufield and Byers, and former president and COO of Oracle.