Black Scholes Model

(redirected from Black-Scholes Model)

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 ?
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).
This happens through the common use of volatility measures in pricing assets, such as the Capital Asset Pricing Model and the Black-Scholes Model, that depend on market sentiment and prevailing opinion to construct a perceived 'objective' measure of asset riskiness.
It was a Chicago-based secretive grain futures trading firm and an early adopter of the Black-Scholes model.
The Black-Scholes model and the Cox, Ross and Rubinstein binomial models are the primary pricing models.
His topics include the Black-Scholes model, measures of risk and performance, Levy models, copulas and applications, and filtering.
In the standard Black-Scholes model, the risk position at time [X.
He views select ones, such as the Black-Scholes model for option pricing, as valuable and extremely well constructed.
Merton later extended the Black-Scholes model to accommodate stock options whose underlying stocks are paying dividends by introducing dividend yield ([delta]) to the formula.
Scholes, the co-creator of the 1973 Black-Scholes model that revolutionized the financial industry through its valuation of derivatives, expressed his view in a recent interview with Kyodo News conducted on the eve of the second anniversary of the Sept.
Although The Ascent of Money is pockmarked by digressions (about things like the Black-Scholes model of options pricing) that many lay readers will find arcane and difficult to understand, the book as a whole is animated by Mr.
On the other hand, the government expert's testimony was complete, used the recognized Black-Scholes model and demonstrated the lack of profit potential resulting from the high fee paid and the excessive price charged for the options.