Which of the following is not an input required by the Black-Scholes option pricing model?
A) The expected volatility of the stock
B) The expected return on the stock
C) The risk-free interest rate
D) The current stock price

Question

Quizplus · Accepted Answer

The Black-Scholes option pricing model does not require the expected return on the stock as an input, but rather assumes that the stock price follows a random walk with constant volatility and is therefore unpredictable in the short term. The other inputs required by the Black-Scholes model are the expected volatility of the stock, the risk-free interest rate, and the current stock price.

Which of the Following Is Not an Input Required by the Black-Scholes