Money Laureate Myron Scholes Developed Model Optional Black Scholes Together Fisher Black Q34234366

Money Laureate Myron Scholes developed the model of optional Black Scholes (together with Fisher Black). Describe the above model and explain the cases ???

Expert Answer

The black schools model also known as black schools Merton modelis considered to be the model of price variation. This modelassumes that the price of heavily traded assets follow a geometricBrownian motion with constant drift & volatility. When appliedto stock option, the model incorporates constant price variation ofstock, time value of money, option’s strike price & time tooption expiry.

This is considered to be one of the most important concepts ofmodern financial theory which was developed