How Does the Black-Scholes Model Compare to AMM Pricing in Terms of Risk Assessment?

The Black-Scholes model is a theoretical framework used for pricing European-style options and assessing risk based on five inputs: stock price, strike price, time to expiration, risk-free rate, and volatility. AMM pricing, based on the constant product formula, is a deterministic mechanism where the price is solely determined by the ratio of tokens in the pool.

Black-Scholes focuses on probabilistic future price paths, while AMM pricing is a real-time, path-dependent mechanism. For risk assessment, Black-Scholes calculates Greek values, whereas AMM risk is primarily characterized by impermanent loss and slippage.