Black-Scholes Formula: A Walkthrough

Essay from the year 2012 in the subject Business economics - Offline Marketing and Online Marketing, grade: 1,3, (International University of Applied Sciences), course: Investment Analysis and Portfolio Management, language: English, abstract: This academic paper focuses on breaking down the magic of the Black-Scholes formula, which is used to value options. The author first introduces basic concepts like options, option strategies and the put-call parity to guide the reader through the underlying, basic concepts. To illustrate the use and the power of the Black-Scholes formula, two examples are calculated to better understand the complex steps involved in finding the call value. Finally, a failure case is presented, to show some pitfalls of this mathematical function.

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Black-Scholes Formula: A Walkthrough Kirsche, Cornelius

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