Scholes Model — Black

): The time remaining until the option expires, usually expressed in years. Risk-Free Interest Rate (

represent the cumulative standard normal distribution, calculating the probability that the option will expire in-the-money. Key Assumptions black scholes model

The Black-Scholes model, also known as the , is a mathematical framework used to determine the fair price or theoretical value of an options contract. Introduced in 1973, it revolutionized modern finance by providing a structured way to manage risk and value complex derivatives. The Core Formula and Variables ): The time remaining until the option expires,

The model estimates the price of a European-style option by considering five key market variables: The current market value of the underlying asset. Strike Price ( ): The set price at which the option can be exercised. Time to Expiration ( Introduced in 1973, it revolutionized modern finance by

): A measure of the asset's price fluctuations. High volatility typically results in a higher option premium. The standard formula for a call option (