The Black-Scholes model is considered a continuous model because it assumes that stock prices evolve in a continuous manner over time. This contrasts with discrete models, which analyze stock price changes at specific intervals.
In the Black-Scholes model, stock prices are represented as following a stochastic process called geometric Brownian motion. This process describes the continuous, random movement of stock prices over time, influenced by factors like volatility and risk-free interest rates. The model uses calculus to calculate option prices based on these assumptions.
To determine the option price based on the Black-Scholes Model, input the valuation parameters as indicated below and press calculate.