# Math Help - Black-Scholes model

1. ## Black-Scholes model

Hi,
Could someone help, I dont even know where to start...
The question is, prove the following formula (the one to the right)

Thanks!!

2. ## Re: Black-Scholes model

Hey emme1.

There are three main approaches to prove the Black Scholes formula. They include:

1) The PDE Approach (you transform the problem to a heat equation PDE and solve)
2) The Stochastic DE approach (You use Ito's result and solve)
3) The Probability Approach (You find the random variable that corresponds to a Price at time t and then take the expectation to get the fair price)

All approaches will give the same answer and each requires a different kind of thinking and reasoning.