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

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

Peter Caspers (Contact Author)

Acadia - An LSEG Business ( email )

United States

HOME PAGE: http://acadia.inc

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