In this blog post I start the series every way to derive BSM-OPM. Here I demonstrate the easiest most intuitive way. Since RMarkdown API is depreciated,  I can’t post the RMarkdown notebook directly on wordpress. I kindly ask you to check it out on github. I basically cover Alexei Krouglov’s derivation.

.pdf version:

Intuitive Probabilistic Derivation of Black Scholes – Option Pricing Formula

Originally published: November 20, 2018