Rubinstein (1994) observed that the performance of the Black-Scholes model had deteriorated in recent years, and he attributed this to
A) investor fears of another market crash.
B) higher-than-normal dividend payouts.
C) early exercise of American call options.
D) decreases in transaction costs.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

Rubinstein (1994) attributed the deterioration in the performance of the Black-Scholes model to investor fears of another market crash. This observation reflects the impact of psychological factors and market sentiment on the effectiveness of financial models.

Rubinstein (1994) Observed That the Performance of the Black-Scholes Model