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This document describes the derivation of the Black-Scholes pricing equations for vanilla call and put options. It begins by presenting two integral expressions that can be used to calculate option prices. It then performs one of the integrals to obtain closed-form pricing formulas. For calls, the pricing formula is expressed in terms of the cumulative distribution function of the standard normal and involves the terms ln(K/F0) + X + σ2τ and ln(K/F0) - X. For puts, a similar formula is derived with φ = -1 i

Author

jios

Language

EN