How Is the ‘Black-Scholes Model’ Dependent on Oracle Data?

The Black-Scholes model, used to calculate the theoretical fair price of an option, requires five key inputs. The model is directly dependent on oracle data for two critical inputs: the current spot price of the underlying asset and the implied volatility.

An inaccurate or manipulated spot price from a faulty oracle will lead to a miscalculation of the option's fair value, resulting in mispricing and potential arbitrage opportunities.