What Are the Five Key Inputs to the Black-Scholes Model?
The five key inputs required for the Black-Scholes option pricing model are: the current price of the underlying asset, the option's strike price, the time remaining until the option's expiration, the risk-free interest rate, and the expected volatility of the underlying asset's returns. These variables are used to calculate the theoretical fair value of a European option.
Glossar
Black-Scholes Option Pricing Model
Framework ⎊ The Black-Scholes Option Pricing Model provides a foundational analytical structure for determining the theoretical fair value of European-style options.
Five Key Inputs
Input ⎊ The five key inputs are the essential variables required for calculating the theoretical price of an option using standard models like Black-Scholes.