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 ?
As such, a modified version of the Black-Scholes option-pricing model could be used to value the earnout.
To get the firm off the ground, two of the world's top economists were brought in as principals, Myron Scholes, who co-developed the Black-Scholes option-pricing model, and Robert Merton, who developed a theory of continuous pricing as a means of hedging against stock losses.
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." (5)
Black-Scholes Option-Pricing Model: Developed by Myron Scholes and Fischer Black and published in 1973 for valuing short-term publicly traded options, for which it works extremely well (and is used daily by thousands of traders in millions of transactions).
RELATED ARTICLE: THE BLACK-SCHOLES OPTION-PRICING MODEL
The Black-Scholes option-pricing model is by far the most popular approach.
Here is a simple and cost-effective approach to using a firm's existing spreadsheet program to construct a template to value an option using the Black-Scholes Option-Pricing Model modified for dividend payments.
However, under the ED's requirements, we calculated a $5.75 value per option using the Black-Scholes option-pricing model. This is based on the assumption the stock price's annual standard deviation is 3a%.