= Fischer Black
{c}
{wiki}
<Fischer Black> developed the <Black-Scholes model> with <Myron Scholes>. Their 1973 analysis shows how continuous adjustment of a <replicating portfolio> can eliminate the local exposure to the underlying random price change, leading to a <no-arbitrage> equation for the value of a contingent claim.<The Pricing of Options and Corporate Liabilities by Fischer Black and Myron Scholes>[1973, assumptions and derivation of the valuation equation]{ref}
This approach makes the hedge part of the mathematical explanation of the price. It also makes the assumptions visible: ideal continuous adjustment and the specified price dynamics are ingredients of the derivation, so changing the trading rules or dynamics can change the valuation problem. The <Black-Scholes equation> is therefore a useful starting point for studying both a tractable model and the effects of relaxing its assumptions.<The Pricing of Options and Corporate Liabilities by Fischer Black and Myron Scholes>[Model assumptions, valuation equation and discussion of extensions]{ref}
\Image[https://www.goldmansachs.com/images/migrated/our-firm/history/moments/150th-multimedia/1990-black-litterman-model/800x450.jpg]
{title=<Robert Litterman> and <Fischer Black> in 1994}
{description=Historical photograph hosted and identified by Goldman Sachs; reproduced by external link.}
{source=https://www.goldmansachs.com/our-firm/history/moments/1990-black-litterman-model}
{width=400}
Back to article page
