Black Scholes Merton

[ar169]

In the 2013 Mock Answers regarding an American Option, it says “With only a few very advanced variations, the Black-Scholes-Merton’ model does not price American options.”

I dont get this whatsoever, I thought BSM was for American option and Black model was for European. I dont get why BSM cannot price American options?

[ar169]

BUMP

[S2000magician]

@ar169

In the 2013 Mock Answers regarding an American Option, it says “With only a few very advanced variations, the Black-Scholes-Merton’ model does not price American options.”

I dont get this whatsoever, I thought BSM was for American option and Black model was for European. I dont get why BSM cannot price American options?

The Black model is for forwards, not American options.

BSM prices European options. Period.

[ar169]

Thanks. Checked it in the curriculum and you were right. I knew I was mixing up something

[S2000magician]

@ar169

Thanks.

You’re quite welcome.

@ar169

Checked it in the curriculum and you were right.

Even though that happens occasionally, I understand that it can still come as a shock.