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  1. Nicole Seaman

    YouTube T4-10: Lognormal property of stock prices assumed by Black-Scholes

    Although the Black-Scholes option pricing model makes several assumptions, the most important is the first assumption that stock prices follow a lognormal distribution (and that volatility is constant). Specifically, the model assumes that log RETURNS (aka, continuously compounded returns) are...
  2. Nicole Seaman

    P1.T4.814. The lognormal property of stock prices and the assumptions of Black-Scholes-Merton (BSM) (Hull Ch.15)

    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...