Black Scholes on One Slide
2 Pages Posted: 11 Mar 2012
Date Written: March 10, 2012
Abstract
We derive the black scholes formula in FX context in a very simple way using measure change techniques. Of course, the final result can be used for all asset classes, though the derivation itself relies heavily on the symmetries prevailing in FX. The idea goes back to a presentation held by Iain J. Clark where he did the derivation on just one slide. Here we repeat the derivation trying to fill in some technical details.
Keywords: Black Scholes, FX option, Girsanov Theorem
JEL Classification: C00
Suggested Citation: Suggested Citation
Caspers, Peter, Black Scholes on One Slide (March 10, 2012). Available at SSRN: https://ssrn.com/abstract=2019943 or http://dx.doi.org/10.2139/ssrn.2019943
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