One Key Difference Between the Black and Scholes (B&S)option Pricing

question 79

Multiple Choice

One key difference between the Black and Scholes (B&S) option pricing model and the binomial model is that the B&S model assumes the ____ is known whereas the binomial model does not.

• A) current market value of the underlying asset
• B) annual risk-free rate
• C) strike price
• D) time until expiration
• E) standard deviation of the underlying asset

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Definitions:

Controller

A senior financial officer in a company responsible for overseeing accounting and financial reporting.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenues, expenses, and profits.

Inventory Value

The total cost or market value of all the goods held by a company intended for sale or used in production.

Prime Costs

The combined costs of direct materials and direct labor that are directly involved in the production of a product.