What is the fundamental difference between "capitalism" and the claims about investing with the Black-Scholes equation?
What is the fundamental difference between "capitalism" and the claims about investing with the Black-Scholes equation?
Homework Answers
The fundamental difference is nature of application of these two concepts. Capitalism is about free market with least or no government intervention where the market forces dominate the market, whereas black-Scholes equation is specifically applicable in financial market where the investments in derivative instruments take place. Further, it is the market forces that decide the price in the market under the capitalism, but in financial market, black-Scholes equation is used as an expression to identify the right price of options in the derivative market. So, these two concepts work differently and the scope of impact is also different.
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What is the fundamental difference between "capitalism" and the
claims about investing with the Black-Scholes equation?
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i want to ask about the history of Black and Scholes formula
i want to ask about the history of Black and Scholes formula
This question is designed to make sure you know how to derive the Black-Scholes partial differential...
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This question is designed to make sure you know how to derive the Black-Scholes partial differential equation (pde). a) Write down the key assumptions of the Black-Scholes model. b) Why is Ito's lemma needed? c) Derive the Black-Scholes pde, d) What is the role of hedging? Why is this hedge portfolio also called a replicating portfolio? e) Why does the Black-Scholes pde not have a stochastic component?
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