Black-Scholes Equation

Black-Scholes equation says that how the price of financial derivative changes over time, based on the principle that when the cost is correct, the derivative carries no risk, and no one can profit by selling it at a different price. You can trade a derivative before it matures by assigning an agreed ‘rational’ value to it so that it becomes a virtual commodity in its own right. Black-Scholes equation led us to the massive growth of the financial sector, ever more complex financial instruments, surges in economic prosperity punctuated by crashes, the turbulent stock markets of the 1990s, the 2008-9 financial crisis, and the ongoing economic slump.

Similar Stuff

Chaos Theory | Equations That Changed the World | Abakcus

Chaos Theory

Chaos theory models how a population of living creatures changes from one generation to the next, when there are limits to the available resources. It is one of the simplest…
Information Theory| Equations That Changed the World | Abakcus

Information Theory

Information theory ushered in the age of information. It is basic to today’s digital communications—phones, CDs, DVDs, the Internet.
Schrödinger's Equation | Equations That Changed the World

Schrödinger’s Equation

Schrödinger's equation says that the equation models matter not as a particle but as a wave and describes how such a wave propagates.
Relativity | Equations That Changed the World | Abakcus

Relativity

Einstein's relativity formula says that matter contains energy equal to its mass multiplied by the square of the speed of light.
Maxwell's Equations | Equations That Changed the World | Abakcus

Maxwell’s Equations

Maxwell's equations were the first major unification of physical forces, showing that electricity and magnetism are intimately interrelated.
Navier-Stokes | Equations That Changed the World | Abakcus

Navier-Stokes

Navier-Stokes is actually Newton’s second law of motion in disguise. This formula provides an accurate way to calculate how fluids move.
Fourier Transform | Equations That Changed the World | Abakcus

Fourier Transform

Fourier transform says any pattern in space and time can be considered a superposition of sinusoidal patterns with different frequencies.
Wave Equation | Equations That Changed the World | Abakcus

Wave Equation

Wave equation says the acceleration of a small segment of a violin string is proportional to the average displacement of neighbor segments.