Abstract
In this chapter, we present the work of Black-Scholes and derive the Black-Scholes option pricing formula that follows their argument. While we have essentially derived the formula in the previous chapter, this approach has the added advantage that we can explicitly compute the hedging strategy. We also consider the diffusion model of the stock prices and obtain the price of the option via the Feynman-Kac formula.
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© 2000 Springer Science+Business Media New York
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Kallianpur, G., Karandikar, R.L. (2000). Black and Scholes Theory. In: Introduction to Option Pricing Theory. Birkhäuser, Boston, MA. https://doi.org/10.1007/978-1-4612-0511-1_10
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DOI: https://doi.org/10.1007/978-1-4612-0511-1_10
Publisher Name: Birkhäuser, Boston, MA
Print ISBN: 978-1-4612-6796-6
Online ISBN: 978-1-4612-0511-1
eBook Packages: Springer Book Archive