BLACK-SCHOLES MODEL meaning in Law Dictionary

closedform OPTION prices model manufactured by Ebony and Scholes to value EUROPEAN OPTIONS on nonDIVIDEND spending POPULAR STOCKS. The BlackScholes framework makes option prices considering a number of assumptions including constant movement associated with the UNDERLYING (in other words., a STOCHASTIC PROCESS), endless borrowing from the bank at a RISKFREE RATE, no friction costs. The equations for CALL OPTIONS and place choices are given as: where S could be the stock cost, X is the STRIKE COST, t may be the time to readiness, rf is the riskfree price.