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The Research on the Black-Scholes Formula

Pengyun Wang, Yingdai Guan, Weixin Zhang

Abstract


At the beginning of 1970s,Fischer Black and Myron Scholes have made the unprecedented work in the domain of the option pricing theory,and proposed the first complete option pricing model,which named the Black—Scholes pricing formula . It has been accepted by the theoretical and industrial world for its wide application,and becomes the secondary great revolution in the financial domain.
However,in the actual financial market,a mass of finance practice has indicated that there is a serious warps between the hypothesis of Black-Scholes model and the actual markets.
This dissertation introduces the option elementary knowledge briefly,and then carries out a specific study on the the history of option pricing theory as well as factors that influence option price.

Keywords


Black-Scholes formula, Volatility smile, Traders’ beliefs, the probability of positive returns

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References


ZHOU Juan , HAN Li2yan,(2008) China Academic Joernal Electronic Publishing house,Recovering of implied risk2neutral probability distributions of foreign exchange futures options and market sentiment,197-205

E. V. Shuryak, Yad. Fiz. 18, 1302 (1973) [Sov. J. Nucl. Phys.18, 667 (1974)].

Scott, L.O., Option Pricing When the Variance Changes Randomly: Theory, Estimation, and An Application," Journal of Financial and Quantitative Analysis, 22, 419-438, 1987.




DOI: http://dx.doi.org/10.18686/fm.v6i2.3399

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