The Black-Scholes Model

descriptionPublicationkeyboard_double_arrow_right Part of book or chapter of book , Other literature type 01 Jan 2013 English Publisher:Springer Basel

Authors: Hansjoerg Albrecher; Andreas Binder; Volkmar Lautscham; Philipp Mayer;

doi: 10.1007/978-3-0348-0519-3_6

The Black-Scholes Model

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Abstract

In the last chapter we introduced a binomial model, which provided an intuitive way for pricing derivatives and finding replicating portfolios. However, the binomial model often oversimplifies the real world, so that in practice one would aim to choose a model setup that better describes reality. In this chapter we will discuss a continuous-time model which is broadly considered today the classical model of mathematical finance.

Related Organizations

University of Lausanne
Switzerland
Graz University of Technology
Austria

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