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This document summarizes key points from a lecture on option pricing theory: 1) It introduces notation used in option pricing and defines call and put option payoffs. 2) It describes the Black-Scholes model for option pricing and presents the Black-Scholes formula for European call and put options. 3) It outlines the effects that changes in underlying variables like stock price, strike price, time to expiration, volatility, interest rates and dividends have on call and put option prices.

Author

Jo Tsai

Language

EN