About this document
Black-Scholes Martingale Framework by zooor is a document available to read on EtoBox.
This document establishes the Black-Scholes formula using the martingale approach. It introduces equivalent martingale measures and shows that they allow expectations of terminal claims to equal current value in absence of arbitrage. It then explicitly finds an equivalent martingale measure for geometric Brownian motion, allowing the Black-Scholes formula to be derived as the discounted expectation of the payoff.
- Author
- zooor
- Language
- EN