# Black Scholes Model

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## 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.
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As co-originator of the Black-Scholes options pricing model, he was awarded the Nobel Memorial Prize in Economic Sciences in 1997 with Prof.
After the proposition of Black and Scholes options valuation model, Dan Galai (1977) conducted one of the first tests of market efficiency by identifying mispriced options using Black-Scholes model on Chicago Board of Options Exchange (CBOE).
Topics include the Black-Scholes PDE for self-financing portfolios, the probabilistic martingale approach to computing option prices, estimation of volatility, interest rate modeling, and default risk in the bond markets.
Along the way he developed an options pricing model that predated Black-Scholes by an additional 20 years.
Moreover, we show how we can recuperate non-Gaussian Black-Scholes formulas using distortion operators and we provide illustrations of their performance.
PRICING THE FUTURE: FINANCE, PHYSICS, AND THE 300-YEAR JOURNEY TO THE BLACK-SCHOLES EQUATION comes from a financial economist who provides a history of the options pricing formula, one of the world's most significant intellectual achievements.
The Black-Scholes equation was the mathematical justification for the trading that plunged the world's banks into catastrophe.
Almost all of the modern, complex financial models are based on some variation of the same quantitative methods used in the Black-Scholes model.
Both recipients are recognized for their significant contributions to the financial markets, including the discovery and development of the Black-Scholes options pricing model, used to determine the value of options derivatives.
The Fischer Black Prize is awarded biannually to a financial economist under age 40 for a body of original research that is relevant to finance practice as exemplified by the research of the late Fischer Black, the co-author of the seminal Black-Scholes option pricing model and other highly original contributions.
Coverage encompasses modern portfolio theory, the Black-Scholes option pricing formula, and the Shapiro-Wilk test for stock market data.
123(R) purposes than other option-pricing models such as Black-Scholes or the binomial method.

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