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Assumptions of the Black-Scholes-Merton Model

October 20, 2015
  • The price of the underlying asset follows a lognormal distribution.
  • The continuous risk-free rate is constant and known.
  • The volatility of the underlying asset is constant and known.
  • Markets are frictionless.
  • The underlying assets generates no cashflows.
  • The options are European.

From → Asset Valuation

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