The Black-Scholes Option Pricing Formula

question 1

Multiple Choice

The Black-Scholes option pricing formula

• A)is used widely in practice,especially by international banks in trading OTC options.
• B)is not widely used outside of the academic world.
• C)works well enough,but is not used in the real world because no one has the time to flog their calculator for five minutes on the trading floor.
• D)none of the options

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Definitions:

Traditional Model

A conventional or long-established approach or method used in business, economics, or other fields.

Private Company Council

A body that provides recommendations to the Financial Accounting Standards Board (FASB) regarding the accounting treatment for private companies.

Legally Independent

The status of an entity that operates under its own legal rights and responsibilities, separate from its owners or other entities.

Tax Abatement

A reduction or exemption from taxes granted by a government for certain activities or investments, often used to encourage economic development.