The Black-Scholes option pricing formula for a(n) ____ financial call option is often used to value real options.
A) American
B) European
C) Asian
D) South American

Question

Quizplus · Accepted Answer

The Black-Scholes option pricing formula is used to value European call and put options, which can only be exercised on the expiration date. Real options refer to the opportunities to invest in or delay investment in a project based on the changes in market conditions. These options resemble European options, hence the use of the Black-Scholes formula to value them.

The Black-Scholes Option Pricing Formula for A(n) ____ Financial Call