Black model

A version of Black–Scholes–Merton for European options on futures or forwards. The futures price takes the place of spot and is discounted along with the strike, since a futures contract costs nothing to enter.

Where you will meet it

Black model appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Explain how the Black model values European options on futures contracts
  CFA Level II · Derivatives and Risk Management

  “The Black model prices European options on futures or forwards.”

• Explain how the Black model values European swaptions and European interest rate options
  CFA Level II · Derivatives and Risk Management

  “The Black model extends to rates.”

See also

European option

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with B · Glossary