Black-Scholes option-pricing model

Black-Scholes option-pricing model

A model for pricing call options based on arbitrage arguments. Uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the expected standard deviation of the stock return. Developed by Fischer Black and Myron Scholes in 1973.

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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Under "fair value reporting," options are valued using the Black-Scholes option-pricing model, a binomial model, or some other acceptable model with modifications allowed for early exercise and other factors.
I am also responsible for naming the model, "the Black-Scholes Option-Pricing Model.
This section has explored conditions under which the Black-Scholes option-pricing model can be validly applied to the pricing of assets with derivative-security-like structures, even when the underlying asset-equivalent is neither continuously traded nor continuously observable.
Myron Scholes, Nobel Laureate in Economic Sciences and co-originator of the Black-Scholes option-pricing model.
RELATED ARTICLE: THE BLACK-SCHOLES OPTION-PRICING MODEL
75 value per option using the Black-Scholes option-pricing model.
The fair value of options granted was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions for the stock options granted since the beginning of the year:
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.
The Black-Scholes option-pricing model is by far the most popular approach.
Companies should train employees to use the Black-Scholes option-pricing model just as they train them to use other sophisticated models under varying levels of uncertainty.
If the Board goes this route, there is still value in knowing how to compute a stock option value using the Black-Scholes Option-Pricing Model as illustrated in the FASB's exposure draft.