This is call and put options price calculator that uses the Black-Scholes model. The model helps to calculate the price of a European option based on the current stock and strike prices, risk-free interest rate, time to maturity and the expected volatility of the underlying asset price.
The underlying assumptions of the Black-Scholes model:
- the underlying price follows a geometric lognormal diffusion process;
- the risk-free rate is known and constant;
- the volatility of the underlying asset is known and constant;
- there are no taxes or transaction costs;
- there are no cash flows on the underlying (e.g. payments of dividends);
- the options are European (e.g. cannot be exercised before the maturity date).