Black then assumed that the Capital Asset Pricing Model applied both to the stock and warrant, so that E(Ax) and E(Aw) would depend on, respectively, the beta of the stock and the beta of the warrant. He also assumed that the stock price followed a log-normal random walk and that he could eliminate those terms that are "second order" in At. In addition, Black seems to have simplified the problem by assuming that, as he and Scholes put it (1973, p. 640): "The stock pays no dividends or other distributions."

Donald MacKenzie, An Engine, Not a Camera, loc. 1266