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write a 200 word good job response and ask a question to The Black-Scholes model is a differential equation that supports options pricing, it relies
write a 200 word good job response and ask a question to "The Black-Scholes model is a differential equation that supports options pricing, it relies on market assumptions to create the formula. One of the main assumptions is that underlying volatility of the asset is constant during the time the contract is open. Naturally, this assumption is quite difficult to maintain because it is almost impossible to predict volatility and that volatility is a spectrum that follows on a curve also know as a volatility skew. Volatility is the measure of an asset's price fluctuation. Price movement can happen for a variety or reasons. Here are a few: News - Global events, pandemics, elections. Even an analyst on Bloomberg News saying he is bearish can have an effect on the broader market. Economic data - Earnings, funding, 10Ks. A company releases financials and it shows an unexpected change, or just an earnings report. Investor sentiment - Overall feeling by the general public. If a population changes views of a stock or company due to various reasons it can cause price fluctuations. The market has periods of high volatility naturally as well as stability. This inherently make it difficult for the
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