Abstract:
This article discusses an equation to find an option pricing model, known as Black-
Scholes equation. Black-Scholes equation is constructed with the concept of capital
asset pricing model. Capital asset pricing model is used to choose the optimum
asset in equilibrium market, to get small risks at the asset. European put option
model is a solution of non-dividen of Black-Scholes equation by converting Black-
Scholes equation into the heat equation. An example of application of Black-Scholes
equation is given at the end discussion.