Black-Scholes Formula

Essay from the year 2012 in the subject Business economics - Offline Marketing and Online Marketing grade: 13 (International University of Applied Sciences) course: Investment Analysis and Portfolio Management language: English abstract: This academic paper focuses on breaking down the magic of the Black-Scholes formula which is used to value options. The author first introduces basic concepts like options option strategies and the put-call parity to guide the reader through the underlying basic concepts. To illustrate the use and the power of the Black-Scholes formula two examples are calculated to better understand the complex steps involved in finding the call value. Finally a failure case is presented to show some pitfalls of this mathematical function.