Chapter 15. The Black-Scholes-Merton Model Study Notes contains 24 pages covering the following learning objectives:

* Explain the lognormal property of stock prices, the distribution of rates of return, and the calculation of expected return.

* Compute the realized return and historical volatility of a stock.

* Describe the assumptions underlying the Black-Scholes-Merton option pricing model.

* Compute the value of a European option using the Black-Scholes-Merton model on a non-dividend-paying stock.

* Define implied volatilities and describe how to compute implied volatilities from market prices of options using the Black-Scholes-Merton model.

* Explain how dividends affect the decision to exercise early for American call and put options.

* Compute the value of a European option using the Black-Scholes-Merton model on a dividend-paying stock, futures, and exchange rates.

* Describe warrants, calculate the value of a warrant, and calculate the dilution cost of the warrant to existing shareholders.

After reviewing the notes, you will be able to apply what you learned with practice questions.

Shop Courses