December 2013
Beginner to intermediate
286 pages
5h 46m
English
Content preview from F# for Quantitative FinanceBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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Learning the Black-Scholes formula
The Black-Scholes formula was developed by Fischer Black and Myron Scholes in the 1970s. The Black-Scholes formula is a stochastic partial differential equation which estimates the price of an option. The main idea behind the formula is the delta neutral portfolio. They created the theoretical delta neutral portfolio to reduce the uncertainty involved.
This was a necessary step to be able to come to the analytical formula, which we'll cover in this section. The following are the assumptions made under the Black-Scholes formula:
- No arbitrage
- Possible to borrow money at a constant risk-free interest rate (throughout the holding of the option)
- Possible to buy, sell, and shortlist fractional amounts of underlying assets ...
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I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.