The Pricing of Options and Corporate Liabilities, Black-Scholes, 1973

This is one of the legendary papers in finance, where Fischer Black and Myron Scholes introduced their methodology of option pricing that is now known as the Black-Scholes(-Merton) Option Pricing Model. The Pricing of Options and Corporate Liabilities was first published in the Journal of Political Economy, Vol. 81, No. 3 (May – Jun 1973), pp. 637-654, The University of Chicago Press.

The Pricing of Options and Corporate Liabilities PDF

Here you can download the paper in pdf for free (the following are a few links that are working as I am publishing this post – if one fails, try another; if all fail, try Google):

F. Black about The Pricing of Options and Corporate Liabilities, 1987

This is an interesting one-page article where Fischer Black briefly describes the process that led him and Myron Scholes to discovering their option pricing model and how The Pricing of Options and Corporate Liabilities was first rejected by the Journal of Political Economy and accepted only after a suggestion by Merton Miller and Eugene Fama.

Download link:

Merton’s Extension of the Black-Scholes Model

Robert C. Merton further examined the model introduced in The Pricing of Options and Corporate Liabilities, derived an alternative formula, and provided several extensions of the model. Together with The Pricing of Options and Corporate Liabilities, Merton’s Theory of Rational Option Pricing (1973) represents the foundation of what is now known as the Black-Scholes(-Merton) Option Pricing Model.


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