the reptile with a healthy and comfortable The important assumptions of the blackscholes model are:
:
for some constant q (the dividend yield).
under this formulation the arbitrage-free price implied by the blackscholes model can be shown to be
: of the stock price is paid out at pre-determined times t, t, .... The price of the stock is then modelled as
:
is a normal random variable with mean and variance . It follows that the mean of s is
:. Now, for a call option the pde above has boundary conditions... read more
