Explain how the black-scholes option pricing model builds

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Reference no: EM131540802

a) Explain how the Black-Scholes option pricing model builds on the binomial model. Where does it make extensions? Where is it similar?

b) Use the Black-Scholes formula to calculate the price of a call option given the following information: S = 50.1$ / £ , X = 55.1$ / £ , %1 r = , %2 = ∗ r ,T = 1, ο = 20% .

Reference no: EM131540802

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