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This is a key concept in modern financial theory used for valuing European options and employee stock options.
Investors can use an online options calculator to get results by adding an option's strike price, the underlying stock's price, the option's time to expiration, its volatility, and the market's risk-free interest rate.
Robert Merton and Myron Scholes won the 1997 Nobel Prize in economics for the Black-Scholes theorem.
MORE IDEAS FROM THE SAME ARTICLE
Political science professor Elinor Ostrom showed that common-pool resources, such as water supplies or fish, can be effectively managed collectively without government or private control.
The economic theory of expected utility maximization says that people will act out of rational self-interest. But psychologist Daniel Kahneman showed that it is incorrect.
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