– Glossary

Black-Scholes formula

This version of the option pricing model is used most often in the standardized pricing on the floors of the various options exchanges. It factors in the current stock price, strike price, time until expiration, level of interest rates, any dividends, and the volatility of the underlying security. Two of the creators of the Black-Scholes model won a Nobel Prize in 1997 for pioneering a new method to value options and other derivatives.

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