Options Pricing Model

Options Pricing Model is a mathematical framework that determines the value of a financial option, which gives the holder the right but not the obligation to buy or sell an asset at a specified price before a certain date. It considers factors like the current price of the asset, the strike price, time until expiration, volatility, interest rates, and dividends. By analyzing these variables, the model helps investors assess whether an option is fairly priced, enabling informed decisions on trading and risk management. The most common model is the Black-Scholes formula.