Black's Model

A variation of the popular Black-Scholes options pricing model that allows for the valuation of options on futures contracts. The Black model is used in the application of capped variable rate loans, and is also applied to price derivatives such as bond options and swaptions.

In 1976, Fisher Black, one of the developers of the Black-Scholes model (which was introduced in 1973), demonstrated how the Black-Scholes model could be modified in order to value European call or put options on futures contracts. For this reason, the Black model is also referred to as the Black-76 model.


Investment dictionary. . 2012.

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