The Black-Scholes model limitations refer to the constraints and shortcomings of the Black-Scholes option pricing formula, which is widely used for pricing European-style options. While the model provides a theoretical framework for valuing options, it assumes constant volatility and interest rates, and it doesn't accommodate early exercise or the unique features of exotic options. These limitations can lead to significant discrepancies between the model's predictions and actual market prices, especially for options that do not conform to standard conditions.
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