When Black's model used to value a European option on the spot price of an asset,which of the following is NOT true?
A) It is necessary to know the futures or forward price for a contract maturing at the same time as the option
B) It is not necessary to estimate income on the underlying asset
C) It is not necessary to know the risk-free rate
D) The underlying asset can be an investment or a consumption asset

Question

Quizplus · Accepted Answer

The futures price embodies all the relevant information needed about the spot price and the income on the asset.However,it is still necessary to know the risk-free rate.

When Black's Model Used to Value a European Option on the Spot