Options (II): Continuous-Time Models, Black–Scholes and Extensions

Patrice Poncet () and Roland Portait
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Patrice Poncet: ESSEC Business School
Roland Portait: ESSEC Business School

Chapter 11 in Capital Market Finance, 2022, pp 399-452 from Springer

Abstract: Abstract This chapter presents the continuous-time model of Black and Scholes and some of its extensions due to Merton, Black. The Black–Scholes model is adapted to European options written on spot assets that do not distribute dividends or coupons before the option expires. Extensions to the standard model are suitable for different types of the underlying asset, among which we discuss the more general Black–Scholes–Merton model with deterministic but not constant volatility, Black’s model applying to futures contracts, Garman and Kholhagen’s model for options on exchange rates, Margrabe’s model for exchange options, and Heston’s model with stochastic volatility.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-030-84600-8_11

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DOI: 10.1007/978-3-030-84600-8_11

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