FINC314 Lecture Notes - Lecture 28: Binomial Options Pricing Model, Myron Scholes, Valuation Of Options
10 Feb 2020
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Earlier, we covered option styles, payoff diagrams, and a bit of usage. This exploratory note continues the discussion with an examination of options pricing. If we had more time, my preference would be to start with the binomial options pricing model as indicated in the syllabus and work our way up to the. Black-scholes model, its continuous time version; however, given that it is nearly the end of the semester, we need to make a bit of a leap. The black-scholes model, sometimes referred to as the black-scholes-merton model, is an options pricing model developed by fischer black and myron scholes and published in the journal of political. C = s n(d1) - e (e-rf t) n(d2) d1 = {ln(s0/e) + [(r+( /2))] t}/( t) d2 = d1 - ( t) 2 = continuous annual variance of the underlying spot price r = continuously compounded annual risk free rate.
