Stalla says the likelihood of being tested on the exact formula is very slim, especially when considering the relative percentage of the exam (Derivatives 5-10%). So is anyone memorizing Black Scholes, or sticking to Binomial?
0 chance and I will bet $10 at 1000:1 odds with anyone who cares to bet.
I’ll take that bet just for the upside. Consider it an arbitrage given the higher odds on lotto tickets with less upside.
At least someone here has some courage…
yea i’d focus on the assumptions/limitations and the 5 inputs
What is B-S good for anyway? a) good for transforming from (strike, price) ->(delta, implied vol) but computer programs do this for you. b) starting place for getting all the greeks, but someone else has done this and computer programs implement it c) looks cool to say you are studying this monster formula d) it is the result of a pretty cool way of solving a (non-stochastic) pde using probability which is a pretty neat trick when you think about it. I can’t look at that formula and get any interesting observations out of it.
C - far and away.
C for me too. I am like their hero (doing the dialogue delivery) when I tell my engineer friends of this Black Scholes model. They think I am too kool… Fact remains, neither me nor them know anything about this model.