The hardest value to estimate for the Black-Scholes model is the
A) riskfree rate.
B) exercise price.
C) present market price of the stock.
D) risk of the stock.

Question

Quizplus · Accepted Answer

The hardest value to estimate for the Black-Scholes model is the risk of the stock, often represented by the volatility (σ) of the stock's returns. This is because volatility is not directly observable and must be estimated from past price movements or implied from market prices of options, both of which can introduce significant uncertainty.

The Hardest Value to Estimate for the Black-Scholes Model Is