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A PEDAGOGIC NOTE ON THE DERIVATION OF THE BLACK‐SCHOLES OPTION PRICING FORMULA
Author(s) -
Garven James R.
Publication year - 1986
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1986.tb01128.x
Subject(s) - black–scholes model , mathematical economics , valuation of options , economics , neutrality , mathematics , actuarial science , financial economics , philosophy , epistemology , volatility (finance)
This paper demonstrates an alternative derivation of the Black‐Scholes option pricing formula based on the risk neutrality arguments of previous researchers. The underlying economic and mathematical structure of the formula is discussed.
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