Unformatted text preview: the option. • Security buyers may borrow any fraction of the purchase price at the short-term, risk-free rate. • Short-term selling is permitted without penalty, and sellers receive immediately the full cash proceeds at today's price for securities sold short. • The call option can be exercised only on its expiration date. • Security trading takes place in continuous time, and stock prices move randomly in continuous time....
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- Spring '08
- Black–Scholes, Myron Scholes, BLACK-SCHOLES OPTION