What is the Black-Scholes Model for Options Pricing?

The Black-Scholes model is a mathematical model used to estimate the theoretical value of a European-style option. It uses several factors, such as the:

• Underlying asset price
• Strike price
• Time to expiry
• Volatility
• Interest rate, and 
• Dividends.

What is the Black-Scholes Formula in India?

Generally, there are two distinct formulas for both call and put options:

Where:

• S0 = Current price of the underlying asset
• Ke = Strike price
• T = Time remaining until expiry
• r = Risk-free interest rate
• N(d) = Cumulative standard normal distribution

The Black-Scholes Model for Options Pricing is also used to calculate option Greeks such as Delta, Gamma, Vega, and Theta. It is most directly suited to European-style options. However, the theoretical value produced by the model can differ from the actual market premium.

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