The Black-Scholes Model

The Black-Scholes Model#

In 1973, Fischer Black and Myron Scholes published a paper that turned an option pricing problem into a heat equation. That connection, between the randomness of stock prices and a classical PDE from physics, was so unexpected that the paper was rejected twice before it saw print. In 1997, Myron Scholes and Robert Merton received the Nobel Memorial Prize in Economic Sciences for this work. Fischer Black had died two years earlier an...