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gegrad
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On Black-Scholes assumptions

February 27th, 2008, 4:08 am

Of all the assumption that we make in the B-S model, which one is the most relevant (i.e. most realistic) and which one is the most unrealistic ?Why ?
 
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Antonio
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On Black-Scholes assumptions

February 27th, 2008, 8:47 am

Most unrealistic : constant vol.Most relevant : None, but it's not such a big problem as the model is used for "normalizing" option prices.