Black-Scholes Option Pricing Model was developed in the 1970s as a way to generate a legitimate and accurate valuation model for stock prices based on specific circumstances in the market and the stock options. It is the creation of economists Myron Scholes and Fischer Black who aimed to better forecast call options at various times within the option life cycle (PBS, 2000). According to the research, "this work involved calculating

Black-Scholes model is essentially a formula used in the calculation of a theoretical call price for options. It is considered to be the fundamental model for pricing in the option market (Cretien, 2006). This model uses in its calculation the five main determinants of an option's price, which include stock price, strike price, volatility, time left until expiration, as well as risk-free, short-term interest rate (Hoadley, 2010). The computations executed

Price Call Models Black-Scholes Model and the Binomial Model are some of the widely used price call options. Despite the fact that these two models share the same theoretical foundation and assumptions like the Brownian motion theory and risk neutral valuation, they happen to have some notable differences (Rendleman & Bartter, 1979). The Black-Scholes model is basically used to calculate a theoretical call price. This call price ignores dividends paid during the

Black-Scholes and Binomial Models There are different variables that usually impact the pricing options. This paper will be based on the attributes of the two widely accepted models that are used for pricing options; Black-Scholes and the Binomial Models. These two models are based on the same theoretical assumptions and foundations like risk neutral valuation and geometric price Brownian motion theory of stock price behavior. Option pricing theory has become among the

Black-Scholes and Binomial Models The variables that impact the pricing of options consist of the following basic factors: the underlying stock price, the strike price of the option, the time until expiration of the option, volatility, interest rates, and dividends (Folger, 2015). However, how these factors are perceived differs according to the model used to gauge the value of the option. The Black-Scholes model and the binomial model differ in their

Financial Management Required: I Net Present Value (NPV) is a financial technique used in capital budgeting to evaluate the profitability of a project. To determine the viability of investment, it is critical to invest when NPV is positive or greater than zero. Organizations face option to move forward with the investment or to abandon an investment. When an NPV is greater than zero, the investment should be accepted. The decision tree