Fragment książki: “OSCYLATOR – Finansowy System Nowego Millenium”
Andrzej Gąsiorowski
@2016
Professors Robert Merton and Myron Scholes were winners of the 1997 Nobel Prize in Economics for a new method to determine the value of derivatives.
The Black-Scholes Model is flexible enough to do almost anything with. When applied to the advances in computer processing and telecommunications, this formula virtually created a multi-trillion dollar investment market out of thin air. This complex pricing model revolutionized how options could be used. It expanded the scope of investments to include a multitude of financial instruments, and dramatically increased the user’s leveraging ability. In other words, more fractional reserve type debt could be created out of nothing to buy or sell investment assets, which further enhanced the elite’s ability to stymulate the markets.
The Black-Scholes formula is perhaps the most frequently used formula with embedded probabilities in human history. It shows how six variables -the current underlying asset price (S), the option strike price (K), the option time-to-expiration (t), the riskless return (r), the underlying asset payout return (d), and the underlying asset volatility (s) – work together to determine the value of a standard option.
Fischer Black and Myron Scholes worked together at MIT in the late 1960’s and early 1970’s to solve the problem of option valuation. They looked at it from two angles. First, they used an equilibrium model (the capital asset pricing model); second, they used a hedging argument proposed by their colleague Robert Merton, who had also been working on the problem with Paul Samuelson. Both approaches led to the same differential equation, known from physics as the ‘heat equation’. Its solution is the formula that has since then borne their names.
Professors Robert Merton and Myron Scholes were winners of the 1997 Nobel Prize in Economics for a new method to determine the value of derivatives.
The original formula for options trading became too limited in its scope of investments and ability to leverage. In 1973, the spirit of the world moved on Fischer Black (deceased), Myron Scholes and Robert Merton, and led them to develop the 1973 “Black-Scholes Model for Options Trading”.
