Black Scholes on One Slide

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