Black-Scholes Model

Explanation

The Black-Scholes model revolutionized options pricing by providing a closed-form solution based on five inputs: stock price, strike price, time to expiration, risk-free rate, and volatility. The model assumes log-normal stock price distribution, constant volatility, no dividends, and efficient markets. While these assumptions are violated in practice (creating the volatility smile), Black-Scholes remains the foundation of options pricing and the starting point for more complex models.

Formula

How Stoquity Uses This

Stoquity incorporates black-scholes model analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.