Black-Scholes Options Pricing Model

Jiøí Slaèálek
Authors registered in the RePEc Author Service: Jiri (Jirka) Slacalek

Czech Journal of Economics and Finance (Finance a uver), 2000, vol. 50, issue 2, 78-98

Abstract: This paper deals with the most widespread model of options pricing, the Black-Scholes model. The model is derived in the usual way, by means of Ito?s lemma. The Black-Scholes partial differential equation is obtained under the assumption of geometric Brownian motion of the underlying stock. Several useful generalizations, including a brief overview of risk-neutral pricing, are discussed. The last section contains an empirical test of this model using daily data from the Chicago Board Options Exchange. The appendix gives a thumbnail sketch of the fundamental results of stochastic differential calculus.

Keywords: Black-Scholes model; stochastic approach (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:50:y:2000:i:2:p:78-98

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