The Black-Scholes Differential Equation| Derivation
#Black_Scholes_Equation
Join us as we explore one of the most influential equations in financial history: the Black-Scholes equation. In this video, we break down the basics of the Black-Scholes differential equation, explain the underlying assumptions, and demonstrate its application in financial modeling. Learn how Fischer Black and Myron Scholes revolutionized the field of economics, earning them the Nobel Memorial Prize in Economic Sciences. Whether you're a student, a finance professional, or just curious about the mathematics behind financial markets, this video is for you!
Timestamps:
0:00 Introduction
0:25 The Black-Scholes Differential Equation
1:04 Stock Price Dynamics
1:50 Objective of the video
2:15 Applying Ito’s Formula
2:45 Constructing a Portfolio
3:08 Change in Portfolio Value
3:20 Substituting for dC and dS
4:10 Creating a Risk-Free Portfolio
4:41 Return on the Portfolio
5:04 Putting It All Together
5:38 Boundary condition
6:30 The Solution
7:20 Assumptions of the Model
Don't forget to like, comment, and subscribe for more in-depth financial content!
~-~~-~~~-~~-~
Please watch: "Simulate Brownian Motion in Python "
• Simulate Brownian Motion in Python
~-~~-~~~-~~-~