The theory of Black and Scholes is the basis for all contemporary financial option valuation methods. The theory is based on a portfolio consisting of stocks and options on that stock. The composition of the portfolio is renewed after a short time interval. The Black-Scholes method for valuing...

This study compares modifications of Bachelier's expected-value theory with the Black and Scholes model using implicit parameters from actual option market prices or option premiums. For the purpose of this study, seven Dutch option series were analysed over a period of five months in 2004. In...