The Black-Scholes Option Pricing Formula

I had been fascinated by Black-Scholes since a fellow student at the University of Chicago math department at told me that you could use PDEs to price options. How was that possible?! I wanted to write this presentation up for the CAS Proceedings, but was beaten to it by Mike Wacek’s [1] actuarial explanation. However, Mike’s paper contained a couple of technical glitches that I was able to clarify in [2].

The Black-Scholes Option Pricing Formula

References

References

1.

Wacek, M.G.: Application of the Option Market Paradigm To the Solution of Insurance Problems. Proceedings of the Casualty Actuarial Society. LXXXIV, 701–733 (1997)

2.

Mildenhall, S.J.: Application of the Option Market Paradigm to the Solution of Insurance Problems, Review of M. Wacek. Proceedings of the Casualty Actuarial Society. 1–22 (2000)