C=S N(d 1)-X exp(-r T) N(d2)

These include:

d 1=[ln(s/x)+(r+σ^2/2)t]/(σ√t)

d2=d 1-σ √T

C- initial reasonable price of option

X- option exercise price

S- the current price of the financial assets traded.

T- period of validity of option

R-the risk-free interest rate of continuous compound interest.

σ refers to the annual volatility (standard deviation) of the continuous compound interest (logarithmic) rate of return of stocks.

Conditions of establishment

Any model is based on certain market assumptions. The basic assumptions of the Black-Scholes model are as follows:

(1) During the validity period of the option, the underlying stock of the buyer's option will not be distributed in dividends or other ways;

(2) There is no transaction cost in buying and selling stocks or options;

(3) The short-term risk-free interest rate is known and remains unchanged during its life;

(4) Any securities purchaser can borrow any amount of funds at a short-term risk-free interest rate;

(5) short selling is allowed, and short sellers will immediately obtain funds at the current price of short selling stocks;

(6) The option is a European option and can only be executed on the expiration date;

Refer to the above content: Baidu Encyclopedia -BS mode