How Does the Black-Scholes Model Account for the Probability of a Catastrophic Event like a 51% Attack?

The Black-Scholes model, which is used for pricing European-style options, does not explicitly account for catastrophic, non-continuous events like a 51% attack. It assumes that price movements follow a log-normal distribution, which is a continuous process.

Traders typically adjust for this "jump risk" by observing the implied volatility (IV) and volatility skew. High IV and a skewed smile for out-of-the-money puts can reflect market fear of a sudden, catastrophic price drop.