The generalized Black Scholes option pricing model can be validly applied to options on stocks, futures, currencies, and commodities. The appropriate adjustment for options written on each of the underlying assets is incorporated via the net cost of carry parameter. Note that particular values for the net cost of carry parameter result in the generalized model reducing to other well known pricing models. The appropriate settings for each of the underlying assets are listed below:


Underlying Asset 
Net Cost of Carry 
Equivalent Model 

. 

Stock  no dividend 
b = r 
Black Scholes (1973) 

Stock  continuous dividend yield 
b = r  q 
Merton (1973) 

Futures 
b = 0 
Black (1976) 

Currencies 
b = r  r_{f} 
Garman Kohlhagen (1983) 

Commodities 
b = r  c 






Where, 
b = net cost of carry. 


r = riskless interest rate. 


rf = foreign riskless interest rate. 


q = continuous dividend yield. 


c = continuous net convenience yield (convenience yield less storage costs) of the underlying asset 
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