Black-Scholes Option Pricing Model

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Black-Scholes Option Pricing Model (alternatively known as OPM) is the model that is derived from the concept of a riskless hedge, this model calculates the value of an option as the difference between the expected PV of the terminal stock price and the PV of the exercise price.


Definitions

According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),

Black-Scholes Option Pricing Model (OPM). Derived from the concept of a riskless hedge, this model calculates the value of an option as the difference between the expected PV of the terminal stock price and the PV of the exercise price.

Related concepts

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