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Black–Scholes equation

The Black-Scholes equation is a mathematical formula used to determine the fair price of options, which are contracts giving the right, but not the obligation, to buy or sell assets at a set price. Developed by economists Fischer Black, Myron Scholes, and Robert Merton, it considers factors like the current asset price, the exercise price, time until expiration, interest rates, and market volatility. By providing a systematic way to evaluate options, it has revolutionized finance, helping traders and investors make informed decisions in buying and selling these financial instruments.

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    The Black-Scholes equation is a mathematical formula used to estimate the price of financial options. It helps investors determine what an option (the right to buy or sell an asset at a certain price) should be worth, based on factors like the asset's current price, the option's strike price, time until expiration, market volatility, and interest rates. By providing a systematic way to evaluate options, the Black-Scholes model is crucial in finance for managing risks and making informed trading decisions. It revolutionized how options are priced and traded in the financial markets.