Explain Black–Scholes model
Explain Black–Scholes model.
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The Black-Scholes model is depends on geometric Brownian motion for asset price S as
dS = µSdt + σSdX.
The Black-Scholes partial differential equation for value V of an alternative is then
∂V/∂t + ½ σ2S2 (∂2V/∂S2) + rS (∂V/∂S) - rV = 0
For queries Q1 and Q2, we say Q1 is containedin Q2, denoted Q1 C Q2, iff Q1(D) C Q2
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