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    Question

    The Black-Scholes formula is used for? 

    A Pricing Options Correct Answer Incorrect Answer
    B Calculating Yield to Maturity Correct Answer Incorrect Answer
    C Pricing of future contracts Correct Answer Incorrect Answer
    D Pricing of Swaps Correct Answer Incorrect Answer
    E Bond pricing Correct Answer Incorrect Answer

    Solution

    The Black-Scholes formula (also called Black-Scholes-Merton) was the first widely used model for option pricing. It's used to calculate the theoretical value of European-style options using current stock prices, expected dividends, the option's strike price, expected interest rates, time to expiration and expected volatility. The formula, published in 1973, by three economists – Fischer Black, Myron Scholes and Robert Merton – is perhaps the world's most well-known options pricing model. 

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