The Black-Scholes Formula

Part of the Springer Finance book series (FINANCE)


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.


Brownian Motion Conditional Expectation Risky Asset Discount Price Stochastic Calculus 
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© Springer-Verlag Berlin Heidelberg 2007

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