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.
References in periodicals archive ?
Myron Scholes, Nobel Laureate in Economic Sciences and co-originator of the Black-Scholes option-pricing model.
The fair value of this option was calculated using 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.