Home > Business > IJBF > Vol. 1 > Iss. 2 (2003)
Abstract
Extract:
The Black-Scholes model is derived under the assumption that hedging is done instantaneously. In practice, there is a "small" time that elapses between buying or selling the option and hedging using the underlying asset. Under the following assumptions used in the standard Black-Scholes analysis, the value of the option will depend only on the price of the underlying asset S, time t and on other variables assumed constants. These assumptions or "ideal conditions" as expressed by Black-Scholes are the following.
Recommended Citation
Bellalah, Mondher
(2003)
"The extended Black-Scholes model with-lags-and "hedging errors","
International Journal of Banking and Finance:
Vol. 1:
Iss.
2, Article 6.
Available at:
http://epublications.bond.edu.au/ijbf/vol1/iss2/6