19. Black-Scholes Formula, Risk-neutral Valuation

MIT 18.S096 Topics in Mathematics with Applications in Finance, Fall 2013
Instructor: Vasily Strela

This is a lecture on risk-neutral pricing, featuring the Black-Scholes formula and risk-neutral valuation.

License: Creative Commons BY-NC-SA

[SeikoVanPaath]

Some notable Timestamps:
03:49 Risk Neutral Valuation: Introduction
11:02 Binomial Tree example & Replicating Portfolio
22:32 Black-Scholes equation
33:33 Black-Scholes: Risk Neutral Valuation
36:06 Concluding example

[ahmadbittar]

His presentation is actually very clear and I love the examples he has given. So I don't know why there are a lot of bad comments. Thank you MIT for sharing this.

[jdsherri]

A very common problem in academic lecture videos, unfortunately, is that the camera is more often on the speaker and not on the material.

[fiendinr]

He switched the signals on the call put parity formula. Good class besides that

[xh]

i think he explained the concept very well with some .business insights. I am happy

[lazywarrior]

Don't be so harsh on him. He is just a guest lecturer from Stanley, not an educator of any sort. Lower your bars please.

[angeloc]

5% implied on the forward...ah, the good old days!

[norayrhayruni]

6.57: 'Call option can be viewed as an insurance against the asset going down'. BUT If the value goes down you would not exercise your option, since you would not be willing to buy it at a predetermined 'higher' price than what is now in the market. I believe the put option can be viewed as an insurance!

[zxdbsft]

“If you put $1 into cambridge bank then in a year you get nothing be ause rates are basically zero” hahaha best comedy ever

[davidmorgan]

Bonds… looking into bonds… AMC/BBBY.. just seems like the next logical addition

[samsontsui]

6:50 "call option can be viewed as insurance against price going down." A insurance against price going down is called PUT.

[varo]

The short story is that not even the MIT can come up with good teachers for this stuff: those who know, don't tell, and those who tell, don't know.

[jdsherri]

absolutely awesome at 1.75 replay speed, but not at examples

[YouTubeFunHandle]

Many years later, the historians will write: “ long time ago, humans were obsessed with the money system they created that so many brilliant minds wasted their life on.”

[lorenzo-llm]

what a world we live in right now ... interest rate Nov 2022 ...

[edwinthomasr]

The beyonce-knowles equation has helped me earn dozens of dollars on the options playing feild!!

[валерийсоколов-пя]

4*10000 -5000 =-10000 50000*1/4 -1000 =2500

[orjihvy]

This is also a very good presentation.

[NbyD]

wish the camera would stay on the slides rather than following the lecturer for a good fraction of the time.

[saintelohim]

Why is this video short compare to other videos in this series? Also 43:06, the signs of the put-call parity equation needs to be adjusted.