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.

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