# How Is the 'Black-Scholes Model' Dependent on Oracle Data? ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

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## 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.

- [What Is a ‘Black-Scholes’ Model and How Does It Relate to Option Pricing?](https://learn.greeks.live/path/what-is-a-black-scholes-model-and-how-does-it-relate-to-option-pricing/)

- [How Does the Black-Scholes Model Form the Basis for Options Quoting in Crypto RFQs?](https://learn.greeks.live/path/how-does-the-black-scholes-model-form-the-basis-for-options-quoting-in-crypto-rfqs/)

- [How Does the Capital Expenditure (CAPEX) Model of PoW Differ from the Staking Model of PoS for Security?](https://learn.greeks.live/path/how-does-the-capital-expenditure-capex-model-of-pow-differ-from-the-staking-model-of-pos-for-security/)

- [How Does the “Black-Scholes-Merton” Model Relate to the Concept of an Option’s Fair Value?](https://learn.greeks.live/path/how-does-the-black-scholes-merton-model-relate-to-the-concept-of-an-options-fair-value/)

- [How Does the Black-Scholes Model Relate to Crypto Options?](https://learn.greeks.live/path/how-does-the-black-scholes-model-relate-to-crypto-options/)

- [What Is the ‘Black-Scholes Model’ and What Is Its Primary Use in Derivatives?](https://learn.greeks.live/path/what-is-the-black-scholes-model-and-what-is-its-primary-use-in-derivatives/)

- [How Is Implied Volatility Used to Calculate the Theoretical Value of a Crypto Option?](https://learn.greeks.live/path/how-is-implied-volatility-used-to-calculate-the-theoretical-value-of-a-crypto-option/)

- [How Does IV Relate to the Black-Scholes Model for Option Pricing?](https://learn.greeks.live/path/how-does-iv-relate-to-the-black-scholes-model-for-option-pricing/)

## Glossar

### [The Black-Scholes Model](https://learn.greeks.live/area/the-black-scholes-model/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Foundation ⎊ The Black-Scholes model serves as the cornerstone for modern options pricing theory, providing a continuous-time framework for calculating the fair value of derivatives.

### [Faulty Oracle](https://learn.greeks.live/area/faulty-oracle/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Derivation ⎊ A Faulty Oracle within cryptocurrency, options, and derivatives contexts denotes a data source providing inaccurate or manipulated information crucial for pricing and risk assessment.

### [Current Spot Price](https://learn.greeks.live/area/current-spot-price/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Price ⎊ Within cryptocurrency markets, the current spot price represents the prevailing market value for immediate delivery of an asset, typically denominated in a fiat currency or another cryptocurrency.

### [Oracle Data](https://learn.greeks.live/area/oracle-data/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Source ⎊ Oracle Data represents external, real-world information, such as asset prices, interest rates, or market volatility indices, that is securely and reliably fed into a blockchain's smart contracts.

## Discover More

### [What Is the Role of the 'Risk-Free Rate' in the Black-Scholes Model and How Is It Determined for Crypto?](https://learn.greeks.live/path/what-is-the-role-of-the-risk-free-rate-in-the-black-scholes-model-and-how-is-it-determined-for-crypto/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Role of the 'Risk-Free Rate' in the Black-Scholes Model and How Is It Determined for Crypto?](https://learn.greeks.live/wp-content/uploads/2025/10/Crystalline-Bifurcation-of-Digital-Asset-Futures-Utilizing-Volatility-Surface-Skew-Projections.webp)

The risk-free rate discounts future option payoffs to present value. Proxies like T-bill yields or trusted DeFi rates are used for learn.

### [Can the Black-Scholes Model Be Adapted to Value the Option-like Features of a Governance Token?](https://learn.greeks.live/path/can-the-black-scholes-model-be-adapted-to-value-the-option-like-features-of-a-governance-token/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Can the Black-Scholes Model Be Adapted to Value the Option-like Features of a Governance Token?](https://learn.greeks.live/wp-content/uploads/2025/10/Futuristic-Digital-Asset-Custody-Vessel-Encasing-a-Black-Box-Option-Contract-Oracle-Sphere.webp)

BSM can be adapted to value governance tokens as real options on future protocol cash flows or treasury access.

### [How Is Implied Volatility Derived from the Black-Scholes Model?](https://learn.greeks.live/path/how-is-implied-volatility-derived-from-the-black-scholes-model/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Is Implied Volatility Derived from the Black-Scholes Model?](https://learn.greeks.live/wp-content/uploads/2025/10/Tangible-Manifestation-of-Tokenized-Asset-Allocation-Within-High-Frequency-Trading-Architecture.webp)

Implied volatility is derived by inputting the option's current market price into the Black-Scholes model and solving for the unknown volatility variable.

### [What Is the Black-Scholes Model and What Are Its Core Inputs?](https://learn.greeks.live/path/what-is-the-black-scholes-model-and-what-are-its-core-inputs/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Black-Scholes Model and What Are Its Core Inputs?](https://learn.greeks.live/wp-content/uploads/2025/10/Quantum-Entanglement-Parity-Violation-in-High-Frequency-Crypto-Derivatives-Settlement-Mechanisms.webp)

Black-Scholes prices European options using underlying price, strike, time, risk-free rate, and implied volatility as inputs.

### [What Is the Primary Difference between the Black-Scholes and the Binomial Option Pricing Model?](https://learn.greeks.live/path/what-is-the-primary-difference-between-the-black-scholes-and-the-binomial-option-pricing-model/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Primary Difference between the Black-Scholes and the Binomial Option Pricing Model?](https://learn.greeks.live/wp-content/uploads/2025/10/Refraction-Dynamics-of-Glass-Geometries-Simulating-Volatility-Surface-Skew-in-Digital-Asset-Options.webp)

Black-Scholes is a continuous-time model; Binomial is a discrete-time model and can price American options.

### [How Is the Black-Scholes Model Adapted for Use in Cryptocurrency Options?](https://learn.greeks.live/path/how-is-the-black-scholes-model-adapted-for-use-in-cryptocurrency-options/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Is the Black-Scholes Model Adapted for Use in Cryptocurrency Options?](https://learn.greeks.live/wp-content/uploads/2025/10/Crystalline-Bifurcation-Modeling-Volatility-Surface-Geometry-in-Decentralized-Finance-Structures.webp)

It is adapted by replacing the risk-free rate with a crypto-specific cost of carry or funding rate for perpetual futures.

### [How Does the Black-Scholes Model Incorporate Theta?](https://learn.greeks.live/path/how-does-the-black-scholes-model-incorporate-theta/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Black-Scholes Model Incorporate Theta?](https://learn.greeks.live/wp-content/uploads/2025/10/Sleek-Dark-Blue-and-Ivory-Flying-Saucer-Obscured-Mechanism-Representing-Decentralized-Finance-Protocol-Architecture.webp)

Theta is mathematically derived from the Black-Scholes formula as the partial derivative with respect to time.

### [Why Is Monte Carlo Simulation a Preferred Method for Path-Dependent Options?](https://learn.greeks.live/path/why-is-monte-carlo-simulation-a-preferred-method-for-path-dependent-options/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Why Is Monte Carlo Simulation a Preferred Method for Path-Dependent Options?](https://learn.greeks.live/wp-content/uploads/2025/10/Crystalline-Apex-Structure-Over-Pleated-Fan-Substrate-Representing-DeFi-Option-Vault-Volatility-Surface-Dynamics.webp)

It easily models the option's payoff, which depends on the asset's price history, by averaging the payoffs from many simulated paths.

### [How Does the Concept of 'Implied Volatility' Arise from the Black-Scholes Model?](https://learn.greeks.live/path/how-does-the-concept-of-implied-volatility-arise-from-the-black-scholes-model/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Concept of 'Implied Volatility' Arise from the Black-Scholes Model?](https://learn.greeks.live/wp-content/uploads/2025/10/Microstructure-Analysis-of-Digital-Asset-Settlement-Mechanisms-Through-Option-Delta-Hedging-Protocols.webp)

IV is the volatility value that, when input into Black-Scholes, results in the option's observed market price. It is calculated in reverse.

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**Original URL:** https://learn.greeks.live/learn/how-is-the-black-scholes-model-dependent-on-oracle-data/
