Publication detail

Black-Scholes Model Differential Equation and its Modifications for Valuation of Financial Derivatives

JANKOVÁ, Z.

Original Title

Black-Scholes Model Differential Equation and its Modifications for Valuation of Financial Derivatives

Type

conference paper

Language

English

Original Abstract

The presented paper deals with the methods of evaluating financial derivatives employing differential equations while focus is placed mostly on options contracts. The popular Black and Scholes model is derived, as well as its two less known modifications, namely that of Merton and Garman-Kohlhagen; moreover, the current status of scientific models following from the original Black-Scholes model is mapped. The paper refers to the considerable drawbacks and limitations of the option valuation models, in particular in turbulent times when economy diverges from standard conditions. Despite the countless number of modifications of the original Black-Scholes model that are often very complicated and unsolvable without the use of computer technology, traders keep using the original models for evaluating options contracts.

Keywords

Differential equations, derivative contracts, financial derivatives, options contracts, European-style options, mathematical modelling, Black-Scholes model, Merton model, Garman-Kohlhagen model

Authors

JANKOVÁ, Z.

Released

25. 4. 2018

Publisher

IBIMA

Location

Milano, Italy

ISBN

978-0-9998551-0-2

Book

Inovation Management and Education Excellence through Vision 2020

Pages from

801

Pages to

811

Pages count

11

BibTex

@inproceedings{BUT148232,
  author="Zuzana {Janková}",
  title="Black-Scholes Model Differential Equation and its Modifications for Valuation of Financial Derivatives",
  booktitle="Inovation Management and Education Excellence through Vision 2020",
  year="2018",
  pages="801--811",
  publisher="IBIMA",
  address="Milano, Italy",
  isbn="978-0-9998551-0-2"
}