In the Black-Scholes model, the determinant that is not explicitly considered for the value calculation of a call option is Expected beta of the underlying stock correct option is a.
The Black-Scholes model for valuing call options involves several factors, but the expected beta of the underlying stock isn't one of them. The model incorporates the price of the underlying stock, the exercise price of the option, time to expiration.
However, beta, representing the stock's volatility relative to the market, isn't directly used in the Black-Scholes equation. Instead, the model relies on stock price volatility (sigma), which reflects the standard deviation of the stock's returns.
Beta measures systematic risk in relation to the market, while the Black-Scholes model focuses on implied volatility derived from historical stock price movements. Therefore, beta, although significant in portfolio diversification and risk assessment.
complete the question
Sure, here is the complete question:
Which of the following is not a determinant of the value of a call option in the Black-Scholes model?
(a) Expected beta of the underlying stock
(b) Price of the underlying stock
(c) Exercise price of the stock
(d) Interest rate