The landmark partial differential equation formula for pricing European options.
The landmark partial differential equation formula for pricing European options.
Developed by Fischer Black, Myron Scholes, and Robert Merton in 1973, it provides theoretical prices for European options using current stock price, strike, maturity, interest rate, and volatility.
Assumes Geometric Brownian Motion and constant riskless interest rate.
Foundational theoretical model for financial derivatives engineering.