Which of the following is not a variable required to determine an option's value in the Black-Scholes valuation model? A) Future security price. B) Exercise price. C) Time to expiration. D) Risk-free rate. E) Security price volatility.

Question

Quizplus · Accepted Answer

The future security price is not a required variable in the Black-Scholes valuation model because it is assumed to follow a log-normal distribution and can be estimated using the current security price and the security price volatility. The other variables (exercise price, time to expiration, risk-free rate, and security price volatility) are required to calculate the option value.

Which of the Following Is not a Variable Required to Determine