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If I want to discuss Black–Scholes formula, where should I post?
The Black-Scholes formula is a mathematical equation used to calculate the theoretical value of European-style stock options. It takes into account factors such as the current price of the underlying asset, the strike price, the time until expiration, and the volatility of the asset.
The Black-Scholes formula was developed by Fischer Black and Myron Scholes in 1973, with the assistance of Robert Merton. They were awarded the Nobel Prize in Economics in 1997 for their groundbreaking work.
The Black-Scholes formula makes several key assumptions, including that the underlying asset follows a lognormal distribution, there are no transaction costs or taxes, and the risk-free interest rate is constant. It also assumes that the option can only be exercised at its expiration date and that the market is efficient.
The Black-Scholes formula is not suitable for valuing options on assets that do not follow a lognormal distribution, such as commodities or currencies. It also does not account for market volatility changes, which can greatly affect the value of options. Additionally, the formula does not consider factors such as dividends and early exercise of options.
The Black-Scholes formula is used by investors and financial institutions to price options and manage risk. It is also commonly used as a benchmark for comparing the value of options in the market. Traders may also use the formula to identify mispriced options and execute profitable trades.