Black-Scholes without stochastics or PDEs
We show how to derive the Black-Scholes model and its generalisation to the `exchange-option' (to exchange one asset for another) via the continuum limit of the Binomial tree. No knowledge of stochastic calculus or partial differential equations is assumed, as we do not use them.
- Pub Date:
- January 2023
- Quantitative Finance - Pricing of Securities;
- Mathematics - Probability
- Added S1.7 on derivation of the delta