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A model for pricing call options based on arbitrage arguments. Uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the expected standard deviation of the stock return. Developed by Fischer Black and Myron Scholes in 1973.

Copyright © 2005, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

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Keywords

Black-Scholes option-pricing model

Black-Scholes

Fischer Black

Myron Scholes

stock price

exercise price

risk-free interest rate

expiration

standard deviation