Black-Scholes Option Pricing Model investment & finance definition

A formula to calculate the value of European style options. The formula was introduced in 1973 by Fischer Black and Myron Scholes. The Black-Scholes formula assumes that the primary factors affecting the price of an option are the value of the underlying asset, the exercise price of the option, the volatility of the underlying asset, the risk-free rate of interest, and the remaining time to expiration.