Mathematical Modeling
The Black-Scholes Model is a mathematical framework used to calculate the theoretical price of options, which are financial derivatives that give the holder the right to buy or sell an asset at a predetermined price. This model provides insights into the pricing dynamics of options by incorporating various factors such as the underlying asset's price, strike price, time to expiration, risk-free interest rate, and volatility of the underlying asset. The significance of this model lies in its ability to assist investors in making informed decisions about trading options in financial markets.
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