Questions tagged [black-scholes]

Black-Scholes is a mathematical model used for pricing options.

1,171 questions
Filter by
Sorted by
Tagged with
51 views

Proof of the value of an option using hedging and no-arbitrage [ Paul Wilmott Chapter 3.12.2]

I encounter a difficulty in understanding the proof of finding the value of an option. Before going into the proof, let's talk above the assumptions and parameters of the model. Assume that we know ...
• 109
65 views

• 111
31 views

Tradeability of Option (not underlying) necessary assumption in BSM?

Working with the Black Scholes Model to value european Call and Put Options I encountered a question that came up during the valuation of a (european Call) Option, which itself cannot be traded (e.g. ...
1 vote
166 views

• 229
49 views

Real Options for investment valuation (Basics)

Thank you for checking out this post. I already asked a question once on this forum, and you did a great job helping me out with that topic, as I couldn’t have come across a solution myself. This time,...
99 views

Why A Derivative With Intrinsic Arbitrage Cannot Be Valued & Hedged With Assets In Risk Neutral?

I'm attempting to concisely show why a derivative that, by nature, introduces arbitrage cannot be valued using risk neutral pricing tools. Derivative: Buyer is sold a 'call option', with time 0 value ...
127 views

Trying to follow course notes deriving Black-scholes PDE, but I can't fill in the gaps

I'm a math master student. I'm trying to follow a course-note that unfortunately has chasms to fill for this specific derivation. Rigour unfortunately has been thrown to the gutter. Let $G$ denote a ...
33 views

Model for markets with friction

Is there a stochastic model for describing how equities behave in markets with trading fees, and if so what model is most commonly used? I'm envisioning something similar to the Black Scholes model, ...
• 1