Can You Price Options with Just Basic Statistics? A Simple Black-Scholes Pricing Derivation
Audience: high-schoolundergraduate
Tags: probabilitystatisticsquantfinancemathematical-financeoptions
This video explores arguably the most important discovery in mathematical finance in the last 100 years: the Nobel Prize-winning Black-Scholes-Merton option pricing formula. It is structured as a self-contained lesson that walks through a full derivation of the formula in a way that is accessible to anyone with knowledge of calculus-based probability and statistics. No financial background is needed. We include 6 exercises with hints and sample solutions to encourage working through the derivation on your own.
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better than most. really well introduced and easy to understand. good graphics too. very nice. You made some assumptions about statistics competancy. would have been nice if you went a bit deeper into that to begin with.
I dont think people would use this complicated method to personally calculate the price option.
Good video. But, I dont think the creator designated a right pool of audiences
This is an excellent video for those who wonder about quantitative formulas but are yet to see the probability and analysis that lies underneath it all. I appreciate how thorough you were with formulating the cfd and pdf problems. And I appreciate even more how you strongly emphasized the need to set a problem solving technique by simulating and iterating to an analytic solution, absent of the industry. Given this knowledge, you also gently walked the audience through financial math definitions in terms of understanding BSM Pricing. These were the individual scores that led to your Ranking score: Motivation: 8 Clarity: 10 Novelty: 9 Memorability: 7
Please create more of your videos!
Very good. There’s another way of not using stochastic calculus https://www.mdpi.com/1911-8074/16/12/501
Obviously the video is a bit long.
Very standard animation and the topic is interesting as well.
A complex approach for high-school students, and the lesson is so long that it may be difficult to follow. It could be useful for specialists in the field.
Cool visuals!
The presentation, visualization, and theme are great. It really teaches the basics of option prices. I would’ve liked an asterisk on Ed Thorp, and another one about the differences between model and reality (like why the formula shouldn’t be applied blindly). It would be nice to have a follow up video on hedging but perhaps that’s not as easy to explain for a general audience (i am not really sure). Thanks for the great video!
I have only reviewed a handful of videos, but this is the first video that comes across trying to actually teach the math. The way that you teach is great and I appreciate the thoughtful hints. The animations at the end added a lot of intuition and made me realize that time and variance are kind of the same! At points it could have been helpful to additionally write out what symbols/constants stand for, but jumping back a little bit in the video solved it for me. I hope you make more videos in the future. I think it is very difficult to explain this topic better than you did.