the black scholes model is one of the most important concepts in modern financial theory also known as the black scholes merton bsm model this mathematical equation estimates the theoretical value of derivatives based on other investment instruments taking the impact of time and other risk factors into account it was developed in 1973 and is still regarded as one of the best ways to price an options contract 
history of the black scholes modeldeveloped in 1973 by fischer black robert merton and myron scholes the black scholes model was the first widely used mathematical method to calculate the theoretical value of an option contract it uses current stock prices expected dividends the option s strike price expected interest rates time to expiration and expected volatility the initial equation was introduced in black and scholes 1973 paper the pricing of options and corporate liabilities published in the journal of political economy robert c merton helped edit the paper he published his own article in the bell journal of economics and management science later that year theory of rational option pricing he expanded the mathematical understanding and applications of the model and coined the term black scholes theory of options pricing 12scholes and merton were awarded the nobel memorial prize in economic sciences in 1997 for their work in finding a new method to determine the value of derivatives black had passed away two years earlier so he could not be a recipient because nobel prizes are not given posthumously the nobel committee acknowledged his role in the black scholes model however 3