Black Scholes

The Black–Scholes model, often simply called Black–Scholes, is a model of the varying price over time of financial instruments, and in particular stocks. The Black–Scholes formula is a mathematical formula for the theoretical value of European put and call stock options that may be derived from the assumptions of the model. The equation was derived by Fischer Black and Myron Scholes; the paper that contains the result was published in 1973. They built on earlier research by Paul Samuelson and Robert Carhart Merton. The fundamental insight of Black and Scholes is that the call option is implicitly priced if the stock is traded. The use of the Black–Scholes model and formula is pervasive in financial markets.