Black-Scholes

A mathematical model considered to be one of the best ways of determining a fair price of a European call option. The Black Scholes model makes a number of assumptions including that volatility is constant over time. It then considers variable such as the strike price, stock price, expiration date, expected dividends, expected interest rates and standard deviation of a stock’s return to calculate the value of an option. It was developed by Fischer Black and Myron Scholes in 1973 and later modified by Robert Martin.

This definition is for general information purposes only