The Black-Scholes equation is a mathematical model used to price options, specifically European-style options. It was introduced by economists Fischer Black and Myron Scholes in their 1973 paper, with significant contributions from Robert Merton. The equation provides a theoretical estimate of the price of European call and put options and is widely used in financial markets. The Black-Scholes equation is based on several assumptions, including: 1. The stock price follows a geometric Brownian motion with constant volatility.
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