What Are the Main Limitations or Assumptions of the Black-Scholes Model?

The main limitations of Black-Scholes include its assumptions that volatility is constant, the underlying asset price follows a random walk, the risk-free rate is constant, and no transaction costs exist. It also assumes European-style options (only exercisable at expiration).

These assumptions are often violated in real-world markets, especially in crypto, leading to the model being an approximation rather than a perfect pricing tool.