The Black–Scholes paper: a personal perspective

Anthony Neuberger ()
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Anthony Neuberger: City, University of London

Decisions in Economics and Finance, 2023, vol. 46, issue 2, No 15, 713-730

Abstract: Abstract This is a personal assessment of the intellectual contribution of the Black–Scholes model of option pricing. I argue that the real contribution of the paper is to show that European options can be replicated exactly if the future variability of the path of transaction prices is known. The continuous rebalancing and the probabilistic setting of the original paper mask this insight.

Keywords: Option pricing; Dynamic hedging; Realized variance; B26; G13 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10203-023-00415-z

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