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In particular, the model estimates the variation over time of financial instruments such as stocks, and using the implied volatility of the underlying asset derives the price of a call option. The model assumes the price of heavily traded assets follows a geometric Brownian motion with constant drift and volatility. When applied to a stock option, the model incorporates the constant price variation of the stock, the time value of money, the option's strike price, and the time to the option's expiry. It's used to calculate the theoretical value of options using current stock prices, expected dividends, the option's strike price, expected interest rates, time to expiration and expected volatility. The formula, developed by three economists—Fischer Black, Myron Scholes and Robert Merton—is perhaps the world's most well-known options pricing model. Black passed away two years before Scholes and Merton were awarded the Nobel Prize in Economics for their work in finding a new method to determine the value of derivatives the Nobel Prize is not given posthumously; however, the Nobel committee acknowledged Black's role in the Black-Scholes model.
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We Went to Inner Portland’s Last Porn Theater. Here’s What Happened. - Willamette Week

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