This model is a call and put options price calculator that uses the Black-Scholes model, a widely-used model for fair option pricing. The model can be used to calculate the value of a European option based on the current stock price, current strike price, expected interest-rate, time to expiration and the expected volatility of the underlying asset price.
Please note the following underlying assumptions of the Black-Scholes model:
1. The underlying price follows a geometric lognormal diffusion process
2. The risk-free rate is known and constant
3. The volatility of the underlying asset is known and constant
4. There are no taxes or transaction costs in buying the option
5. There are no cash flows on the underlying (for example, payments of dividends)
6. The options are European (so they cannot be exercised before the expiration date, unlike U.S. options)
To use, simply input underlying asset price, exercise price, risk-free interest rate, volatility and time to expiration to calculate the option value.