Black-Scholes

Black-Scholes

Part a

The functioning of the options market is based on the possibility of buying a call option or asset sale, under an agreed price by a certain future date. If the value exceeds the agreed amount within the period, the buyer of the option to buy the asset, and immediately sell it and make profit. Otherwise, no need to buy it, only losing the money paid for the purchase of the option. Risk management is based on the fact that you can use math to tell how much risk you are taking in order to help decide a fair price.

The Black & Scholes formula says that value investors place in financial derivatives, making what would be a guessing game in mathematical science, to be used four variables (duration of option prices, interest rates and market volatility) to generate the price that should be charged for an option. This paper analyzes this tool, exploring possibilities and its uses as a tool to support decision making in organizations (SOUZA et.al, pp. 09). When used with respect to financial instruments, "options" are generally defined as contracts between two parties in which one party has rights but not obligations to do something, usually the purchase or sale of any asset. Have rights but not obligations, has financial value, then the holders of options must purchase these rights, turning them into assets.

These assets derive their value from the value of other assets, hence calling derivatives. Options to buy (call) are contracts giving the option buyer the right to buy, while put options (put) obviously give the right to sell. Modern option pricing techniques are usually considered to be among the most mathematically complex of all applied areas of finance. Financial analysts can, with great accuracy, calculate the value of an option. Most of the models and techniques used by these analysts has its roots in the model developed by Fischer Black and Myron Scholes.

The Black & Scholes model consists of equations which permit the fair price of options involving the following variables: the underlying asset, the exercise of the option, interest rate, term and volatility and the future uncertain and that something over which one has limited control, this research seeks to know whether it is possible to develop strategies for organizations relying on the use of mathematical formulas in particular, a proposal by Black and Scholes for reducing uncertainty and increasing the likelihood of success of organizations (SOUZA et.al, pp. 09).

Thus, this paper seeks to analyze this tool, exploring possibilities and its uses as a tool to support decision making in organizations and also evaluated the hypothesis that the mathematical model can be used by non-financial organizations, assessing their potential investments in different areas of the options market.

Investors, entrepreneurs, executives and academics are concerned with determining the fair value of firms and their actions. The earliest records of a corporation date back to the fourteenth century, with the conquest of the city of Chios in the Aegean sea, a ...