Black Scholes

The Black-Scholes model refers to a model for determining the value of stock options that was developed by Fisher Black, Myron Scholes, and Robert Merton. (Scholes and Merton received a Nobel Prize in Economics for this work in 1997.) Black-Scholes relies on relatively complicated mathematics, but the basic concept is to try to estimate the value in current dollars of a stock option (a contract to purchase stock at a particular price at some point in the future). Black-Scholes is usually used for determining the value of European rather than U.S. options because of differences in the ways the dividends are determined