ABSTRACT
Black and Scholes (1973) tackled the problem of pricing and hedging a European option (call or put) on a non-dividend paying stock. Their method, which is based on similar ideas to those developed in discrete-time in Chapter 1 of this book, leads to some formulae frequently used by practitioners, despite the simplifying character of the model. In this chapter, we give an up-to-date presentation of their work. The case of the American option is investigated and some extensions of the model are presented.
