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Of the variables in the Black-Scholes OPM, the __________ is not directly observable. Group of answer choices variance of the underlying asset return risk-free rate of interest price of the underlying asset time to expiration

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Answer:

variance of the underlying asset return

Explanation:

The Black-Scholes is the most widely used model to predict the value of call/put options. It is mostly used for European style options and only works for stocks that do not pay dividends. It is based on five variables that must be inputted in the formula:

  1. underlying stock price
  2. strike price
  3. time until maturity
  4. risk-free interest rate
  5. volatility of the underlying stock

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