In the Black-Scholes model,
A)all of the inputs except two are observable.
B)all of the inputs except one are observable.
C)the greater the stock price,the lower the price of the call option.
D)there is an inverse relationship between the value of a call and interest rates in the market.

Question

Quizplus · Accepted Answer

In the Black-Scholes model, all of the inputs are observable except for one, which is the volatility of the underlying asset. The inputs that are observable include the current stock price, the exercise price, the time remaining until expiration, and the risk-free interest rate. Therefore, choice B is the best answer. Choice C is incorrect because as the stock price increases, the call option price also increases. Choice D is incorrect because there is a direct relationship between the value of a call option and interest rates in the market, not an inverse relationship.

In the Black-Scholes Model