Black Scholes Quotes & Sayings

Looking into it a bit, Jamie found that the model used by Wall Street to price LEAPs, the Black-Scholes option pricing model, made some strange assumptions. — Michael Lewis

Black-Scholes works for short-term options, but if it's a long-term option and you think you know something [about the underlying asset], it's insane to use Black-Scholes. — Charlie Munger

My first reaction on being awarded the Nobel Prize was, actually, I thought of Fischer Black, my colleague. He unfortunately had passed away. And there was no doubt in my mind that if he were still alive, he would have been a co-recipient of the Nobel Prize. — Myron Scholes

The longer-term the option, the sillier the results generated by the Black-Scholes option pricing model, and the greater the opportunity for people who didn't use it. — Michael Lewis

Black-Scholes is a know-nothing system. If you know nothing about value - only price - then Black-Scholes is a pretty good guess at what a 90-day option might be worth. But the minute you get into longer periods of time, it's crazy to get into Black-Scholes. For example, at Costco we issued stock options with strike prices of $30 and $60, and Black-Scholes valued the $60 ones higher. This is insane. — Charlie Munger

My principal contribution to the Black-Scholes option-pricing theory was to show that the dynamic trading strategy prescribed by Black and Scholes to offset the risk exposure of an option would provide a perfect hedge in the limit of continuous trading. — Robert C. Merton