Brian Lee
Aug 12, 2025
Part of: Fundamentals
of Futures And Options Markets By John C. Hull
Black-Scholes-Merton … assumes that the return on the stock in a very short period of time, \(\Delta t\), is normally distributed.
In contrast, future stock prices are assumed to follow a lognormal distribution (Hull 2016, 295).
See Mathematics for the relationship between normal and lognormal distributions.