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Write a report to show that the Black scholes model is complete market using the Fundamental...

Write a report to show that the Black scholes model is complete market using the Fundamental theorem of asset pricing

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Answer #1

Black-Scholes Model :

This model deals with the constant price variation of the stock, time value of money, options strike price and time to expiry. The formula was developed by three economists—Fischer Black, Myron Scholes and Robert Merton. The model assumes stock prices follow a normal distribution because asset prices cannot be negative (they are bounded by zero). This model is used to determine the price of a European call option, which means that the option can only be exercised on the expiration date. Since this model has Risk Neutralizing elements it can be considered as Complete Market.

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