ACF Lecture 2 - Black-Scholes Model

Applied Computational Finance Lecture 2 - Black-Scholes Model

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Zou, Yihan (2025). ACF Lecture 2 - Black-Scholes Model. Q2 ecosystem. Available at https://quantinar.com/course/981/acf-lecture-2---black-scholes-mode or http://dx.doi.org/10.24818/IDA-CL/2025.124.

@misc{zou2025, author = {Zou, Yihan}, title = {ACF Lecture 2 - Black-Scholes Model}, year = {2025}, howpublished = {Q2 ecosystem}, doi = {http://dx.doi.org/10.24818/IDA-CL/2025.124.}, url = {https://quantinar.com/course/981/acf-lecture-2---black-scholes-mode} }
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ACF Lecture 2 - Black-Scholes Model

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In this lecture, we will discuss the most popular model for asset prices, known as the Black-Scholes model. We will discuss the assumptions of this model and uncover its limitations. We will study the concept of implied volatility and its computation by using Newton’s method. We will also consider the so-called Greeks, which measure how sensitive option prices are with respect to changes in the model’s parameters and are essential to create hedging portfolios for derivative instruments.