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The Black-Scholes Model: Z-Scores

From Theory To Practice

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Today, our mini-series dissecting all the ins and outs of the Black-Scholes Model continues, and we tackle the topic of z-scores. Your standard z-score is something that every undergrad business student will encounter in a basic stats class, as it helps describe the relationship between some current observation and the mean of the distribution. But, how does this apply to the BSM? Frank joins the discussion today to help show us exactly how.

You can watch every part of the Black-Scholes series below:

Part One: Pricing a Call

Part Two: Pricing a Put

Part Three: Probability Density Functions: Part One

Part Four: Probability Density Functions: Part Two

Part Five: Standard Normal Variables

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