Black and Scholes model

First successful model for pricing options. The model was invented by US economists Fischer Black and Myron Scholes in 1973. The original model was applicable to simple put and call options on equities but its scope has since been expanded to include more complex transactions. The complex mathematical formula relates the price of an option to five inputs: time to expiration; strike price; value of the option's underlying asset; implied volatility of the underlying asset; and the risk-free rate.