2006•Journal of Chongqing Technology and Business UniversityRequires access

Black-Scholes stock option pricing model and its application

Xinping Liu

Abstract

This paper introduces standard Black-Scholes stock option pricing model,deduces European-style differential equation and its solution,gives pricing formula and relation of the rise and fall of the shares according to European-style equation,analyzes and modifies the equation in order to apply the equation to pricing European-style derived securities and hedging and dividend payment of the volatility of the assets.

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Available abstract

Key concepts: Black–Scholes model, Valuation of options, Dividend, Finite difference methods for option pricing, Monte Carlo methods for option pricing, Volatility (finance), Econometrics, Payment