Topic Details (Notes format)

Black-Scholes

Subject: Economy

Description

The Black-Scholes model is used to calculate the theoretical price of options, helping investors assess potential profits and risks. It considers factors like stock price, strike price, volatility, time, and interest rates. Example: An investor uses the Black-Scholes formula to determine if a stock option priced at $5 is undervalued or overvalued based on market conditions.

Summary

The Black-Scholes model calculates the theoretical price of options.