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Further Reflections Based on the Black–Scholes (B-S) Model

Published online by Cambridge University Press:  16 September 2024

Arturo Cifuentes Open the ORCID record for Arturo Cifuentes [Opens in a new window]  and
Ventura Charlin Open the ORCID record for Ventura Charlin [Opens in a new window]
Arturo Cifuentes*
Affiliation:
Principal Researcher, Clapes UC-Catholic University of Chile, Santiago, Chile
Ventura Charlin
Affiliation:
Senior Research Associate, Clapes UC-Catholic University of Chile, Santiago, Chile; Principal, VC Consultants, New York, NY, USA, 10021
*
Corresponding author: Arturo Cifuentes; Email: [email protected]
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Abstract

The Black–Scholes (B-S) model is considered by the academic environment one of the greatest achievements of financial economics. Yet it brings with it some conundrums. The model is often used in a manner that contradicts one of its assumptions, and its predictions are not supported by market reality. Here we address, from the perspective of philosophy of science, an additional issue related to this model: the distinction between its explanatory and predictive capabilities.

Type
Discussion Note
Information
Philosophy of Science , Volume 92 , Issue 1 , January 2025 , pp. 223 - 228
Copyright
© The Author(s), 2024. Published by Cambridge University Press on behalf of the Philosophy of Science Association

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