Understanding Black-Scholes Option Pricing Model

  • Published : 2007.08.31


Theories related to financial market has received big attention from the statistics community. However, not many courses on the topic are provided in statistics departments. Because the financial theories are entangled with many complicated mathematical and physical theories as well as ambiguously stated financial terminologies. Based on our experience on the topic, we try to explain the rather complicated terminologies and theories with easy-to-understand words. This paper will briefly cover the topics of basic terminologies of derivatives, Black-Scholes pricing idea, and related basic mathematical terminologies.


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