Which one of the five factors included in the Black-Scholes model cannot be directly observed?
A)risk-free rate
B)strike price
C)standard deviation
D)stock price
E)life of the option

Question

Quizplus · Accepted Answer

The standard deviation, which represents the volatility of the stock's returns, cannot be directly observed and must be estimated from historical data or implied by market prices. Other factors like the risk-free rate, strike price, stock price, and life of the option can be directly observed or are known quantities.

Which One of the Five Factors Included in the Black-Scholes