The Black-Scholes option pricing model is dependent on which five parameters?
A) Stock price, exercise price, risk free rate, probability, and time to maturity
B) Stock price, risk free rate, probability, time to maturity, and variance
C) Stock price, risk free rate, probability, variance and exercise price
D) Stock price, exercise price, risk free rate, variance and time to maturity
E) Exercise price, probability, stock price, variance and time to maturity

Question

Quizplus · Accepted Answer

The Black-Scholes option pricing model is dependent on the stock price, exercise price, risk-free rate, variance, and time to maturity. The probability is not a parameter in the model, but it is used to calculate the option's implied volatility, which is one of the inputs for the model.

The Black-Scholes Option Pricing Model Is Dependent on Which Five