The Black Scholes model was developed by Fischer Black and Myron Scholes in 1973.
It is based on a number of simplifying assumptions such as:
- underlying stock prices following a geometric Brownian motion with constant drift and volatility,
- no dividends,
- no transaction costs,
- borrowing and lending at a constant risk free interest rate,
- unlimited as well as fractional purchases and sales.
As a consequence of this model, they derived the Black Scholes equation for the price of an option over time. The formula for determining the price of a European call or put option is a solution of the equation after an application of certain terminal and boundary conditions. The value of the options based on the formula are functions of time to maturity, price of underlying asset, exercise or strike price, risk free interest rate and constant volatility.
This reference guide lists the related free courses and posts available on the site. Whether its valuing options or constructing your first Monte Carlo simulator or reviewing material for your derivatives pricing exam.
Free Courses on Black Scholes
- Computational Finance: Linking Monte Carlo Simulation, Binomial Trees and Black Scholes Equation
- The derivatives crash course for dummies
- Computational Finance: Building Monte Carlo (MC) Simulators in Excel
- Monte Carlo Simulations EXCEL
- Variance Reduction: Quasi Monte Carlo & Antithetic technique
- Derivative Pricing, Risk Management, Financial Engineering – Equation Reference
- Derivative Products
- Difference between N(d1) and N(d2)
- Black Scholes Model – Derivation of N(d2)
- Simulation tools. Variance reduction techniques for option pricing models
- Pricing Commodity linked notes
- Pricing Range Accrual Notes – Extending the cap floor functions
- Value at Risk for Options & Futures
- Estimate Total Addressable Market Size. A case study
- Pakistan retail trade sector size? A lazy data case study
- Estimate Market Size – Sizing Pakistan’s ecommerce market
- The 10 minute Financial Modelling quick reference guide
- Blue Ex: A Third-Party Logistics Valuation Case study