What Is the Primary Output of the Black-Scholes Model?

The primary output of the Black-Scholes model is the theoretical fair value, or premium, of a European-style call or put option. By taking five inputs ▴ the current price of the underlying asset, the option's strike price, the time to expiration, the risk-free interest rate, and the expected volatility (often historical or a projected figure) ▴ the model calculates what the option should be worth.

In practice, this theoretical price is often compared to the market price to determine if the option is over- or undervalued.