Lesson: C15 The Black Scholes Mertorn Model

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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 on a non-dividend-paying stock using the Black-Scholes-Merton model.
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.

Exercise Files