Black-Scholes without stochastics or PDEs
Pricing of Securities
2023-04-04 v2 Probability
Abstract
We show how to derive the Black-Scholes model and its generalisation to the `exchange-option' (to exchange one asset for another) via the continuum limit of the Binomial tree. No knowledge of stochastic calculus or partial differential equations is assumed, as we do not use them.
Cite
@article{arxiv.2301.09996,
title = {Black-Scholes without stochastics or PDEs},
author = {Richard J. Martin},
journal= {arXiv preprint arXiv:2301.09996},
year = {2023}
}
Comments
Added S1.7 on derivation of the delta