The Skinny on Options: Abstract Applications - October 5, 2020 - Probability Density Functions


Oct 05 2020 15 mins   6
As it represents the core pricing that we trade in the marketplace, the Black-Scholes Model continues to be a never ending fountain of content. From simply pricing a call to [establishing put-call parity,](https://www.tastytrade.com/tt/shows/from-theory-to-practice/episodes/a-further-breakdown-of-put-call-parity-03-09-2016 ) many of the relationships we analyze can be traced back to the BSM. And we see that again today, with probability density functions, which are found in the N(d1) and N(d2) pieces of the model. These integral parts are often skipped over, but today, we are reminded that they pave the way for a [probabilistic approach to our portfolios.](https://www.tastytrade.com/tt/shows/from-theory-to-practice/episodes/from-theory-to-practice-06-08-2017 )