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Joined 2026-09-21 Message
Incoming links: Myron Scholes
Fischer Black 2026-11-05
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.[ref]
The Pricing of Options and Corporate Liabilities by Fischer Black and Myron Scholes. 1973, assumptions and derivation of the valuation equation
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.[ref]
The Pricing of Options and Corporate Liabilities by Fischer Black and Myron Scholes. Model assumptions, valuation equation and discussion of extensions
Robert Litterman and Fischer Black in 1994
. Historical photograph hosted and identified by Goldman Sachs; reproduced by external link. Source. Myron Scholes 2026-11-05
Myron Scholes, with Fischer Black, developed the Black-Scholes model and its option pricing equation. Their 1973 paper connects a contingent claim's value to the cost of a dynamically adjusted replicating portfolio, under explicit assumptions about trading and the underlying price process.[ref]
The Pricing of Options and Corporate Liabilities by Fischer Black and Myron Scholes. 1973, assumptions and derivation of the valuation equation
The mathematical insight is that a carefully chosen hedge can cancel the instantaneous random component of the claim's value. No-arbitrage then constrains the remaining locally riskless return, producing the Black-Scholes equation together with a final payoff condition. The result is a conditional conclusion within a model: it does not require an ability to predict the actual stock-price path.[ref]
The Pricing of Options and Corporate Liabilities by Fischer Black and Myron Scholes. Derivation of the differential equation and the boundary condition for a call
Institutional profile: www.gsb.stanford.edu/faculty-research/faculty/myron-s-scholes
Portrait of Myron Scholes
. Markus Prantl, via Wikimedia Commons; existing crop by JB Hoang Tam 2, CC BY-SA 3.0. Source..jpg){kind=link}
Publisher: www.journals.uchicago.edu/doi/10.1086/260062
Original paper: finance.martinsewell.com/option-pricing/BlackScholes1973.pdf
Develops the option-replication argument and the Black-Scholes model pricing equation.