What is the Black-Scholes Model? The Black-Scholes model, also known as the Black-Scholes-Merton (BSM) model, is one of the most important concepts in modern financial theory. This mathematical equation estimates the theoretical value of derivatives, taking into account the impact of time and other risk factors. Developed in 1973, it is still regarded as one of the best ways for pricing an options contract. Interested in learning more? Related articles What is a Breakeven Price? What is Charm? What is a Butterfly Spread? What is At The Money Options? What is a Gamma Profile?