CAPM option pricing

This paper extends the option pricing equations of Black and Scholes, 1973] , Jarrow and Madan, 1997] and Husmann and Stephan, 2007] . In particular, we show that the length of the individual planning horizon is a determinant of an option’s value. The derived pricing equations can be presented in terms of the Black and Scholes 1973. Journal of Political Economy 81, 637–654] option values which ensures an easy application in practice.