Pricing Options Using Black-Scholes Model
In financial management, this model is widely used to price the European call and put options while ignoring dividend payments. Primarily, there are six major factors that impact the options pricing while Black-Scholes Model is used . These factors are as follows:
Market Price of Underlying Asset
As the most influential factor, a rise in current market price of an underlying asset tends to increase the call price and reduces the price of a put option. Vice versa will be the effect when the market price of underlying commodity declines.
Expected Volatility in Prices
Volatility, in financial markets, represents the extent to which the current market price of an Continue reading...