Black-Scholes Model
The Black-Scholes Model is a mathematical framework used to estimate the price of financial options, which are contracts giving someone the right to buy or sell an asset at a specific price within a certain timeframe. It takes into account factors such as the current price of the asset, the option's strike price, time until expiration, interest rates, and the asset's price volatility. The model helps investors make informed decisions by providing a theoretical value for options, aiding in understanding their potential risks and rewards in trading strategies.
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The Black-Scholes model is a mathematical framework used to calculate the price of options, which are financial contracts granting the right to buy or sell an asset at a predetermined price. Developed in the early 1970s, it considers factors such as current asset price, strike price, time until expiration, volatility, and interest rates. By providing a theoretical price, the model helps investors make informed decisions about buying or selling options, contributing to efficient markets. The model's assumptions and findings have significantly influenced finance and investment strategies.