Option Pricing Theory

Discipline: Economics

Option pricing theory is the analysis of the pricing of contracts to buy or sell (termed a call option, and a put option) a commodity or security within a stated period of time at a specific price.

An early pioneer in this field was French economist Louis Bachelier (1870-1946) but the subject received more recent analysis during the 1970s.

Also see: adaptive expectations, random walk hypothesis, rational expectations theory

Source:
F Black and M J Scholes, 'The Pricing of Options and Corporate Liabilities', Journal of Political Economy, 81, 3 (May, 1973) 637-54

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