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The Black-Scholes Formula

Chapter
Part of the Springer Finance book series (FINANCE)

Abstract

In Chap. 2, we obtained the Black-Scholes formula by taking the limit of the binomial model. In this chapter, we present two further methods for obtaining the formula, and then show how analogous results can be obtained in a more general framework. The financial market comprises d risky assets, and one bond or riskless asset. Asset prices are modeled by means of a Brownian motion, using the notion of stochastic integral.

Keywords

Brownian Motion Conditional Expectation Risky Asset Discount Price Stochastic Calculus 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2007

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