The Black-Scholes-Merton Model (FRM Part 1 2023 – Book 4 – Chapter 15)

For FRM (Part I & Part II) video lessons, study notes, question banks, mock exams, and formula sheets covering all chapters of the FRM syllabus, click on the following link: https://analystprep.com/shop/unlimited-package-for-frm-part-i-part-ii/ AnalystPrep is a GARP-Approved Exam Preparation Provider for FRM Exams After completing this reading, you should be able to: - Explain the lognormal property of stock prices, the distribution of rates of return, and the calculation of expected return. - Compute the realized return and historical volatility of a stock. - Describe the assumptions underlying the Black-Scholes-Merton option pricing model. - Compute the value of a European option using the Black-Scholes-Merton model on a non-dividend-paying stock. - Compute the value of a warrant and identify the complications involving the valuation of warrants. - Define implied volatilities and describe how to compute implied volatilities from market prices of options using the Black-Scholes-Merton model. - Explain how dividends affect the decision to exercise early for American call and put options. - Compute the value of a European option using the Black-Scholes-Merton model on a dividend-paying stock.

• #education
• #frm
• #financial_risk_management
• #black_scholes_merton_model
• #bsm_model
• #option_pricing_model