DEFINITION of 'Black Scholes Model'
A model of price variation over time of financial instruments such as stocks that can, among other things, be used to determine the price of a European call option. The model assumes that the price of heavily traded assets follow a geometric Brownian motion with constant drift and volatility. When applied to a stock option, the model incorporates the constant price variation of the stock, the time value of money, the option's strike price and the time to the option's expiry.
Also known as the BlackScholesMerton Model.
INVESTOPEDIA EXPLAINS 'Black Scholes Model'
The Black Scholes Model is one of the most important concepts in modern financial theory. It was developed in 1973 by Fisher Black, Robert Merton and Myron Scholes and is still widely used today, and regarded as one of the best ways of determining fair prices of options.
There are a number of variants of the original BlackScholes model.
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LatticeBased Model
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Stochastic Volatility  SV
A statistical method in mathematical finance in which volatility ... 
Alfred Nobel
The man after whom the Nobel Prize is named. Nobel, born in 1833 ... 
Myron S. Scholes
An American economist and winner of the 1997 Nobel Prize in Economics ... 
Black's Model
A variation of the popular BlackScholes options pricing model ... 
HeathJarrowMorton Model  HJM ...
A model that applies forward rates to an existing term structure ...

What is an option's implied volatility and how is it calculated?
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