The pricing kernel and the Black-Scholes formula

Franco Molinari ()
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Franco Molinari: DISA, Faculty of Economics, Trento University

No 908, DISA Working Papers from Department of Computer and Management Sciences, University of Trento, Italy

Abstract: This note provides an introduction to the pricing kernel methodology for financial derivatives. In order to illustrate the pricing kernel approach we apply it to the Black and Scholes model and obtain the famous Black and Scholes formula for the fair price of an European call option.

Keywords: pricing kernel approach; black and scholes model; call option formula (search for similar items in EconPapers)
Pages: 12 pages
Date: 2009-11, Revised 2010-01-26
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