“Black-Scholes Options Pricing Model” Please respond to the following: The Black-Scholes Options Pricing Model has been criticized based on underlying assumptions related to stock price fluctuations that may not be relevant in today’s marketplace where there is more volatility in stock prices.
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The Black-Scholes model established in 1973 for counting the premium of an option in a paper entitled, “The Pricing of Options and Corporate Liabilities” (Jean Folger).The method produced by the three economists Robert Merton, Fischer Black, and Myron Scholes. The Black-Scholes model is applied to determine the theoretical price of call options and European put, overlooking any dividends paid through the option’s existence. During the life of the option, the primary Black-Scholes model did not get into the attention conclusions of dividends paid, and the model could be modified to account for profits by defining the ex-dividend period rate of an underlying stock. The model presents several assumptions such as No commissions, during the life of option dividends cannot be paid.
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