Rubinstein (1994) observed that the performance of the Black-Scholes model had deteriorated in recent years, and he attributed this to
A)investor fears of another market crash.
B)higher-than-normal dividend payouts.
C)early exercise of American call options.
D)decreases in transaction costs.

Question

Quizplus · Accepted Answer

Rubinstein attributed the deterioration in the performance of the Black-Scholes model to investor fears of another market crash, as these fears can significantly affect market volatility and pricing models.

Rubinstein (1994) Observed That the Performance of the Black-Scholes Model