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Black–Scholes model

The Black–Scholes /ˌblæk ˈʃoʊlz/ or Black–Scholes–Merton model is a mathematical model for the dynamics of a financial market containing derivative investment instruments. From the parabolic partial differential equation in the model, known as the Black–Scholes equation, one can deduce the Black–Scholes formula, which gives a theoretical estimate of the…

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Overview

History

Fundamental hypotheses

Notation

Black–Scholes equation

Black–Scholes formula

The Options Greeks

Extensions of the model

Black–Scholes in practice

Criticism and comments

Primary references

  • Doi Doi (identifier)
  • S2CID S2CID (identifier)
  • Hdl Hdl (identifier)
  • JSTOR JSTOR (identifier)
  • ISBN ISBN (identifier)

Historical and sociological aspects

Discussion of the model

Derivation and solution

Historical

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Black–Scholes model

Nodes151
Edges150
Triples42
Avg. degree1.99
Density0.013245
Components1

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Black–Scholes model

Top relations

related to Criticism and comments · 16
Black–Scholes model → Berkshire Hathaway, Black, Boness, But, Edward Thorp, Emanuel Derman, Espen Gaarder Haug, If, In, Nassim Nicholas Taleb, Paul Wilmott, Scholes, Taleb, The Black, They, Warren Buffett
related to The volatility smile · 7
Black–Scholes model → All, Black, By, If, In, One, Scholes
related to Black–Scholes in practice · 5
Black–Scholes model → Among, Black, Gamma, Scholes, The
related to Valuing bond options · 5
Black–Scholes model → As, Black, Scholes, See Bond, Valuation
related to Fundamental hypotheses · 3
Black–Scholes model → Scholes, The, The Black

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Important terminology

black scholes model option price formula options volatility value displaystyle one call equation risk pricing put underlying asset stock market

Entity relationships Subject–Predicate–Object triples

SubjectPredicateObjectConfidenceSrc
those used by investment banksinstance ofand is the basis of more complicated hedging strategies0.80text
hedge funds.The model is widely usedinstance ofand is the basis of more complicated hedging strategies0.80text
although often with some adjustmentsinstance ofand is the basis of more complicated hedging strategies0.80text
by options market participantsinstance ofand is the basis of more complicated hedging strategies0.80text
GARCH to model volatility changesinstance ofThe variance has been observed to be non-constant leading to models0.80text
the Bachelier model or simply add a constant offset to the pricesinstance ofpractitioners may use a different model0.80text
Black–Scholes modelrelated to Black–Scholes in practiceThe0.60section
Black–Scholes modelrelated to Black–Scholes in practiceBlack0.60section
Black–Scholes modelrelated to Black–Scholes in practiceScholes0.60section
Black–Scholes modelrelated to Black–Scholes in practiceAmong0.60section
Black–Scholes modelrelated to Black–Scholes in practiceGamma0.60section
Black–Scholes modelrelated to Criticism and commentsEspen Gaarder Haug0.60section

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