The Black-Scholes model and valuation of the European Call option
AbstractIn this paper will be considered the simple continuous time model of Black-Scholes. The Black-Scholes formula for valuation of the European Call Option will be shown. It will be given a review of the background of this model and also the basic concepts of stochastic or Ito calculus that are necessary to explore the model.
B. Oksendal, Stochastic differential equation. An introduction with applications, 5th. ed. Springer-Verlag Heidelberg New York,(2000) p. 1-4.
D. Nularet , Stochastic Processes, p.68-113.
D. Teneng, Limitations of the Black-Scholes Model, International Research Journal of Finance and Economics
ISSN 1450-2887 Issue 68 (2011), © EuroJournals Publishing, Inc. 2011
F.Black, M. Scholes, The Pricing of Options and Corporate Liabilities, The Journal of Political Economy, Volume 81, Issue 3, (May-June, 1973), p.637-654.
E.Allen, Modelling with Ito Stochastic Differential Equations, Springer (2007),
I. Karatzas and S. Shreve. Brownian Motion and Stochastic Calculus. Springer. 1998, p.1-22
J. Janssen, R. Manca, E. Volpe di Prignano, Mathematical Finance, Deterministic and Stochastic Models, p.517-540, 641-672
R. F. Bass, The Basics of Financial Mathematics, Department of Mathematics, University of Connecticut, (2003), p.1-43
R.J. Williams. Introduction to the Mathematics of Finance. American Mathematical Society. 2006
S. M. Ross, Stochastic Processes, University of California, Berkeley, John Wiley & Sons, Inc (1996), p.295-405
S.Shreve, Stochastic Calculus and Finance, Carnegie Mellon University, (1997), p.153-175.
T. G. Kurtz, Lectures on Stochastic Analysis, Departments of Mathematics and Statistics University of Wisconsin - Madison (2009), p.42-53