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Study of Black-Scholes Model and its Applications - ScienceDirect

Source: sciencedirect.com

1. The Black-Scholes option pricing model is studied in this paper, including definitions and derivations useful for further development of the formula and partial differential equation.

2. The solution of the Black-Scholes equation is obtained and represented graphically using Maple software.

3. Various numerical techniques have been utilized by researchers to handle nonlinear DEs related to the Black-Scholes model, including Cauchy Euler method, explicit difference scheme, multivariate padé approximation scheme, and finite difference scheme.

The article titled "Study of Black-Scholes Model and its Applications" provides a comprehensive overview of the Black-Scholes option pricing model. The paper discusses various definitions and derivations that are useful for further development of the Black-Scholes formula and partial differential equation. The authors also provide an application of the model by obtaining the solution to the Black-Scholes equation and representing it graphically using Maple software.

The article appears to be well-researched, with references cited from reputable sources such as Cambridge University Press, Springer-Verlag, and Sheldon Ross's "An Introduction to Mathematical Finance." However, there are some potential biases in the article that should be noted.

Firstly, the article focuses solely on the Black-Scholes model without exploring other option pricing models or discussing their advantages and disadvantages. This one-sided reporting may lead readers to believe that the Black-Scholes model is the only viable option pricing model when this is not necessarily true.

Additionally, while the authors briefly mention critiques of the Black-Scholes model in reference [5], they do not explore these critiques in-depth or present counterarguments. This lack of exploration may lead readers to believe that there are no valid criticisms of the Black-Scholes model.

Furthermore, while the authors provide an application of the Black-Scholes model using Maple software, they do not discuss any potential risks associated with using this software or relying solely on mathematical models for financial decision-making. This omission may lead readers to believe that mathematical models are infallible when this is not necessarily true.

Overall, while the article provides a thorough overview of the Black-Scholes option pricing model and its applications, it does have some potential biases and limitations that should be considered when interpreting its findings.