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The Black–Scholes model assumes positive underlying prices; if the underlying has a negative price, the model does not work directly. [ 51 ] [ 52 ] When dealing with options whose underlying can go negative, practitioners may use a different model such as the Bachelier model [ 52 ] [ 53 ] or simply add a constant offset to the prices.
In mathematical finance, the Black–Scholes equation, also called the Black–Scholes–Merton equation, is a partial differential equation (PDE) governing the price evolution of derivatives under the Black–Scholes model. [1]
The Black model (sometimes known as the Black-76 model) is a variant of the Black–Scholes option pricing model. Its primary applications are for pricing options on future contracts, bond options, interest rate cap and floors, and swaptions. It was first presented in a paper written by Fischer Black in 1976.
Myron Samuel Scholes (/ ʃ oʊ l z / SHOHLZ; [1] born July 1, 1941) is a Canadian–American financial economist. Scholes is the Frank E. Buck Professor of Finance, Emeritus, at the Stanford Graduate School of Business , Nobel Laureate in Economic Sciences, and co-originator of the Black–Scholes options pricing model .
Carter G. Woodson was born in New Canton, Virginia, [7] on December 19, 1875, the son of former slaves Anne Eliza (Riddle) and James Henry Woodson. [8] Although his father was illiterate, Carter's mother, Anna, had been taught to read by her mistress.
Robert Cox Merton (born July 31, 1944) is an American economist, Nobel Memorial Prize in Economic Sciences laureate, and professor at the MIT Sloan School of Management, known for his pioneering contributions to continuous-time finance, especially the first continuous-time option pricing model, the Black–Scholes–Merton model.
Fischer Sheffey Black (January 11, 1938 – August 30, 1995) was an American economist, best known as one of the authors of the Black–Scholes equation. Working variously at the University of Chicago, the Massachusetts Institute of Technology, and at Goldman Sachs, Black died two years before the Nobel Memorial Prize in Economic Sciences (which is not given posthumously) was awarded to his ...
Long-Term Capital Management L.P. (LTCM) was a highly leveraged hedge fund.In 1998, it received a $3.6 billion bailout from a group of 14 banks, in a deal brokered and put together by the Federal Reserve Bank of New York.