Forums  > Basics  > Easiest solution for Black Scholes Equation  
     
Page 1 of 1
Display using:  

Jurassic


Total Posts: 415
Joined: Mar 2018
 
Posted: 2020-09-17 14:27
Whats the easiest method to solve the Black Scholes equation (ie easiest to memorise for interviews)?

nikol


Total Posts: 1366
Joined: Jun 2005
 
Posted: 2020-09-17 14:50
upgrade the memory
or
just understand every deriving step. If you do, the rest is easy.

... What is a man
If his chief good and market of his time
Be but to sleep and feed? (c)

bullero


Total Posts: 75
Joined: Feb 2018
 
Posted: 2020-11-13 08:09
0.4*spot*vol*sqrt(T)

bandi_np


Total Posts: 11
Joined: Nov 2020
 
Posted: 2020-11-13 11:49
An easy way is to:
1) "Solve" the SDE using Itô calculus (BS: use log)
2) Get the distribution for the underlying using 1)
3) Compute the expectation using 2) (simple gaussian expectation)

Maybe, you can start with the Bachelier model or arithmetic Brownian motion.

What is bullero saying is the apporximate value of the ATM option:
Previous Thread :: Next Thread 
Page 1 of 1