According to the Black-Scholes formula:
A)the value of an in-the-money option will equal the difference between the stock's current price and the strike price.
B)the payoff from an average option is either a multiple or a power of the difference between the strike price and the price they are exercised at.
C)the holder of a basket option has the right to buy or sell the underlying at the highest price it has attained over the life of the option.
D)the price of a call or put option varies with the price of the underlying asset.

Question

Quizplus · Accepted Answer

The Black-Scholes formula is used to determine the price of a call or put option, and it takes into account factors such as the underlying asset price, strike price, time to expiration, volatility, and interest rates. Therefore, the price of a call or put option will vary with the price of the underlying asset. Choices A, B, and C are incorrect as they do not accurately describe the Black-Scholes formula.

According to the Black-Scholes Formula