How Does the Black-Scholes Model Form the Basis for Options Quoting in Crypto RFQs?

The Black-Scholes model provides a theoretical fair value for European-style options by factoring in the underlying asset price, strike price, time to expiration, risk-free rate, and volatility. While crypto options are often American or use perpetual contracts, the model's framework is adapted.

The model is inverted to calculate Implied Volatility (IV), which is then used in conjunction with proprietary adjustments to generate the final RFQ quote price.