Pg. 129-132

In the fall of 1969 Fischer and Myron Scholes started working on their model for option pricing. It started in a meeting that they were in together and developed in less than a year of them working together on it. This is not to imply that it only took a year to find this model. Both Black and Scholes had been thinking about this for a long time. One of the interesting methods that they used to develop this was to find out what needed to not be in the formula. From there they could get closer to what actually needed to be in the model.

After they had finished it they addressed the issue of why someone should care about what they developed. Black and Scholes wanted this to be useful for more people than just speculators. They concentrated on the fact that their model could actually be used to value the stock of a firm. Allowing people to eventually find the measure of discount due to the chance of default, among other things. I also like that they did give credit to Robert Merton in their first paper about this.