The Black and Scholes Option Pricing Model Makes an Assumption

question 2

True/False

The Black and Scholes option pricing model makes an assumption that markets have normal friction.

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Definitions:

Type I Error

The incorrect rejection of a true null hypothesis, often called a "false positive."

Type II Error

A statistical error that occurs when a false null hypothesis is not rejected, also known as a "false negative" finding.

Two-Tailed Hypothesis

A form of statistical hypothesis testing where the alternative hypothesis specifies that the parameter of interest differs from the null hypothesis.

Population Mean

The average value of all the members of a set or population, denoting the central tendency.