The Black-Scholes partial differential equation is used for valuing European or American put and call option. It is the one of the most effective way for pricing options. The aim of this paper is to study the development and derivation of Black-Scholes partial differential equation. We discuss some useful definitions and derivations which are useful in the development of Black-Scholes Partial differential equation.
Black-Scholes partial differential equation, Ito's Lemma, Put Option, Risk-less interest rate, Strike price
